Final Regulatory Assessment and Final Regulatory Flexibility Analysis Final Rule - Nondiscrimination on the Basis of Disability by Public Accommodations - Movie Theaters; Movie Captioning and Audio Description

As noted in Section 1.3, the Department received 436 comments during the 2014 NPRM comment period from movie industry representatives, individuals with disabilities, advocacy groups representing individuals with disabilities, State and Federal entities, academic organizations, private companies, and other private individuals.  Section 1.3 of the regulatory analysis includes discussion of the comments that directly addressed the assumptions, data, or methodology used in the Initial RA.  This section summarizes the discussion of comments regarding the effects of the rule on small movie theaters.

Proportion of Movie Theaters Qualifying as Small Entities

The Department received comments indicating that the vast majority of movie theaters qualify as small entities, which is supported by the 2012 Statistics of U.S. Businesses (SUSB) data and detailed in Section 7.3 below. 

Small Movie Theater Revenues and Available Resources to Comply
One commenter reported that at least one segment of the movie exhibition industry, art house cinemas, generally receive less than 50 percent of their revenue from ticket sales.  Another commenter asked the Department to consider that almost half of movie theater gross receipts are paid directly to movie studios.  Given these percentages and the fact that the movie exhibition industry as a whole averages a two percent profit margin, with small and independent theater owners often operating at an even smaller or negative profit margin, commenters asked the Department to reconsider its interpretation of cost values relative to annual revenue because these figures do not directly represent funds that are available to comply with this rule.

The Department does not have access to publicly available data that provides a consistent, independent source of movie theater profit by revenue category.  As discussed in Section 7.3  below, available data includes firm receipt size from the 2012 SUSB.³⁶  The Department believes that this dataset is the most relevant, publicly available data on annual revenue figures for the movie exhibition industry and is the best source to assess the resources available to movie theaters to comply with the rule.

Alternatives to Reduce Burdens on Small Movie Theaters
Commenters made various suggestions concerning alternatives to reduce the regulatory burden for small movie theaters.  These suggestions pertained to the following areas: (1) the scoping for devices; (2) the compliance date; (3) the deferral of movie theaters exhibiting movies in analog format; and (4) the deferral of a subset of small movie theaters.  The Department is aware of potential limitations to compliance for small movie theaters and has taken measures to lessen the impact on those firms.  As explained in Section 1.4 and Section 7.6, the Department has decided to defer the decision whether to engage in rulemaking with respect to movie theater auditoriums that exhibit analog movies exclusively, to reduce the scoping requirements for both captioning and audio description devices, and to increase the time movie theaters have to comply with the rule’s captioning and audio description scoping requirements (now 18 months).  These revisions are expected to reduce the cost impact to small firms in the movie exhibition industry.

Response to Comments from the Small Business Administration Office of Advocacy (SBA)
This section specifically addresses comments of the SBA Office of Advocacy in response to the proposed rule.  Most of the concerns expressed by SBA were also expressed by other commenters.

SBA’s comments on the 2014 NPRM focused on the following five issues: lowering the scoping for captioning and audio description devices; deferral of coverage of analog theaters; providing a longer compliance date for the requirements of the rule; the breadth of the definition of “movie theater”; and the application of the undue burden defense for small business movie theaters.  After consideration of these comments and related comments from other commenters, the Department has made a number of changes in the final rule.

First, the Department has significantly lowered the scoping requirements for captioning and audio description devices in response to comments from SBA and other commenters that the Department should not have used seat count as a means of determining the number of devices that would actually be needed to meet demand from people with hearing and vision disabilities.  The revised scoping bases the required number of devices on the number of auditoriums showing digital movies rather than the number of seats. 

Second, the Department has decided to defer the decision whether to apply the specific requirements of this rule to movie theater auditoriums that show analog movies exclusively.  As discussed in the section-by-section analysis, the number of movie theaters that only show analog movies is rapidly declining, and it is unclear whether these theaters will be economically viable in the future, or whether analog movies will even be available for commercial showings.  

Third, the Department has extended the compliance date for all movie theaters subject to this rulemaking.  Movie theaters now have 18 months to comply with the rule’s scoping requirements, and additional time is afforded to movie theaters that convert auditoriums from an analog projection system to a digital projection system after the compliance date of the rule.  After considering the comments on the 2014 NPRM, the Department has concluded that 18 months allows movie theaters sufficient time to order and install the necessary equipment while accounting for potential manufacturer backlogs or the need to raise the necessary funds to purchase the equipment.

Fourth, SBA specifically asked whether the definition of “movie theater” was intended to encompass small movie theaters that occasionally show digital movies using a Blu-ray projector, pop-ups and film festivals, or limited arrangement showings held at alternative venues. The Department believes that in most instances, the requirements of the rule will not apply in these circumstances.  As the definition indicates, a “movie theater,” for purposes of this rulemaking, means “a facility * * * that contains one or more auditoriums that are used primarily for the purpose of showing movies to the public for a fee.”  § 36.303(g)(1)(vii).  Thus, an auditorium generally used for other purposes that temporarily shows movies during a film festival, even if a fee is charged, would not fall within this definition.  By contrast, a movie theater that primarily shows digital movies to the public for a fee remains covered by the requirements of paragraph (g) even if it allows its auditoriums to be used for an annual film festival.  Theaters with analog auditoriums that are not otherwise covered by the specific requirements of § 36.303(g) and temporarily bring in portable Blu-ray or other types of digital projectors to show digital movies are also not likely to fall within the requirements of paragraph (g)  because the compliance date provision assumes conversion of the theater to a digital projection system.  In addition, it is the Department’s understanding that Blu-ray projection systems are not capable of delivering closed movie captions to patrons at their seat; these systems only have the capacity to show captions on the screen, something not required by this rule.

The Department notes that film festivals, pop-up movie theaters, and other alternative venues for showing movies still qualify as places of entertainment and are considered public accommodations under the ADA.  Thus, they continue to be subject to the longstanding general ADA requirement to provide effective communication under § 36.303, unless doing so would be a fundamental alteration of the program or service or would constitute an undue burden.  In addition, if a festival or limited showing programmer schedules the screening of a movie that is already distributed with closed movie captions and audio description using a movie theater auditorium that is subject to the requirements in paragraph (g) as discussed above, then the effective communication obligation would require the festival to ensure that the accessible features are available at all scheduled screenings of a movie distributed with such features. 

Finally, SBA asked that the Department provide additional guidance for small businesses regarding the availability of the undue burden limitation.  Under the ADA, a public accommodation is relieved of its obligation to provide a particular auxiliary aid (but not all auxiliary aids) if to do so would result in an undue burden or a fundamental alteration.  As stated earlier in the preamble, and in existing technical assistance materials, the Department’s title III regulation specifically defines undue burden as “significant difficulty or expense” and, emphasizing the flexible and individualized nature of any such determination, lists five factors that must be considered when determining whether an action would constitute an undue burden.  See 28 CFR 36.104; see also U.S. Department of Justice, ADA Title III Technical Assistance Manual Covering Public Accommodations and Commercial Facilities III-4.3600 (1993), available at http://www.ada.gov/taman3.html.  These factors include: (1) the nature and cost of the action; (2) the overall financial resources of the site or sites involved in the action; the number of persons employed at the site; the effect on expenses and resources; legitimate safety requirements that are necessary for safe operation, including crime prevention measures; or the impact otherwise of the action upon the operation of the site; (3) the geographic separateness, and the administrative or fiscal relationship of the site or sites in question, to any parent corporation or entity; (4) if applicable, the overall financial resources of any parent corporation or entity; the overall size of the parent corporation or entity with respect to the number of its employees; and the number, type, and location of its facilities; and (5) if applicable, the type of operation or operations of any parent corporation or entity, including the composition, structure, and functions of the workforce of the parent corporation or entity.  Id.  This limitation entails a fact-specific examination of the cost of a specific action and the specific circumstances of a particular public accommodation.  This limitation is also designed to ensure that the needs of small businesses, as well as large businesses, are addressed and protected.

The Department intends to publish technical assistance that will address the requirements of the final rule and the limitations on the obligations under paragraph (g) prior to the time the rule takes effect.  In addition, the Department’s wide-ranging outreach, education, and technical assistance program continues to be available to assist businesses to understand their obligations under the ADA.  Additional information about the ADA’s requirements, including the requirement to provide effective communication and the limitations on that obligation, is also available on the Department’s ADA Web site at www.ada.gov.