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

Table 7-3 : Estimated Number of Movie Theaters by Venue Type (2015)

Table 7-4 summarizes the estimated per movie theater costs by venue type, as previously presented in Section 4.1.4 of the Final RA.  The first column in Table 7-4 presents the average upfront costs (acquisition, installation) by venue type while the second column shows the average ongoing annual costs (replacement, training, maintenance and administrative) by venue type.  The rightmost column shows the total undiscounted cost to an average theater by venue type over the 15-year period of analysis.

Table 7-4 : Per Movie Theater Costs, Undiscounted ($)

The FRFA quantifies the impact on small entities by calculating the average upfront costs and the ongoing costs as a percentage of average annual revenue.  As presented in the table above, the per movie theater costs are calculated by venue type.  However, the SUSB program provides no information regarding the venue types operated by firms in each revenue category.  As a result, the analysis uses the following information to estimate the venue types operated by firms in each revenue category:

• The average annual revenue per auditorium is approximately $200,000 to $250,000.⁴³

• Industry research indicates that the firms with the largest annual revenue operate most Megaplex and Multiplex movie theaters, whereas the firms with smaller annual revenues operate most Miniplex and Single-Auditorium movie theaters. 

Based on this information, the FRFA makes the following assumptions regarding the venue types operated by firms in each revenue category:

• Firms with less than $499,999 in annual revenue operate Single-Auditorium movie theaters.⁴⁴  As presented in Table 7-2, firms with less than $100,000 in annual revenue have an average annual revenue of $54,065 per theater; firms with $100,000 to $499,999 in annual revenue have an average annual revenue of $251,651 per theater.  These average revenue figures are close to or below NATO’s estimated annual revenue per auditorium.

• Firms with annual revenues from $500,000 to $999,999 operate Miniplex movie theaters (2–7 auditoriums).  The average annual revenue in this category is $714,762, which is equivalent to the revenue generated by approximately three auditoriums according to NATO’s estimated annual revenue per auditorium. 

• Firms with annual revenues between $1.0 million and $2.5 million operate Miniplex and Multiplex movie theaters.  Costs to firms with annual revenues between $1.0 million and $2.5 million are an average of the costs to Miniplex and Multiplex movie theaters. 

• Firms with annual revenues between $2.5 million and $40 million operate Multiplex and Megaplex movie theaters.  Costs to firms with revenues between $2.5 million and $40.0 million are estimated using a weighted average⁴⁵ of the costs to Multiplex and Megaplex movie theaters based on the number of movie theaters presented in Table 7-3.

Using the above assumptions, Table 7-5 presents the estimated upfront and ongoing annual costs for small entity movie theater firms, grouped into four revenue categories.

Table 7-5 : Venue Type, Upfront Costs, and Ongoing Costs by Revenue Category in FRFA

*Average of Miniplex/Multiplex costs
**Weighted Average of Multiplex and Megaplex Costs based on number of theaters (Table 7-3)

Table 7-6 shows the upfront costs as a percentage of annual revenue for firms by revenue category.  The average costs per firm are derived from the average number of establishments per firm (first column) and the average upfront costs per theater for each revenue category (second column).  As the table shows, the upfront costs make up less than 1.5 percent of annual revenue for all firms except those with revenues of less than $100,000.  For all firms with revenues of $2,500,000 or greater, the upfront cost was less than 1 percent of annual revenues.

As discussed previously, the data from the 2012 SUSB that is provided in this section also includes data from movie theaters operating auditoriums that exhibit analog movies exclusively, which are not subject to the requirements of this rulemaking.  Based on its own independent research and analysis, the Department believes that most firms with annual revenue less than $100,000 are not subject to the requirements of this rule.  Although the FRFA calculates the costs as a percent of annual revenue for this category of firms, the information available to the Department supports its view that most of these firms are likely operating single auditoriums that exhibit analog movies exclusively and are therefore not subject to the requirements of this rule.  First, according to industry experts, the average annual revenue per auditorium is approximately $200,000 to $250,000, thus making it reasonable to assume that firms with annual revenue less than $100,000 operate Single-Auditorium movie theaters.  Second, the Department received information from industry experts that the majority of Single-Auditorium movie theaters still use analog projection systems.  Third, commenters indicated that the remaining movie theaters with analog projection systems have not converted to digital projection systems because they cannot afford the high cost to do so ($60,000 to $150,000 per auditorium⁴⁶).  Therefore, it is reasonable to assume that most of the movie theater firms with less than $100,000 in annual revenue operate movie theaters with analog auditoriums that are not subject to this rulemaking.  In addition, all movie theaters with auditoriums exhibiting digital movies—including any firms with less than $100,000 in annual revenue— continue to have available to them the individualized and fact-specific undue burden limitation specified in § 36.303(a). 

Table 7-6 : Average Upfront Costs as a Percentage of Annual Revenue Per Firm, by Revenue Category, Undiscounted (2015 $)

*Likely firms operating Single-Auditorium movie theaters that exhibit analog movies exclusively, and therefore not subject to this rulemaking.
**Annual revenue data withheld and value set to 0 to avoid disclosing information of individual businesses.

Table 7-7 presents the average annual ongoing cost as a percentage of average annual revenue for firms in each revenue category.  For all firms, except those with annual revenues of $100,000 or less, annual ongoing costs make up less than 0.3 percent of annual revenue. 

Table 7-7 : Average Annual Ongoing Costs as a Percentage of Annual Revenue Per Firm, by Revenue Category, Undiscounted (2015 $)

*Likely firms operating Single-Auditorium movie theaters that exhibit analog movies exclusively, and therefore not subject to this rulemaking.
**Annual revenue data withheld and value set to 0 to avoid disclosing information of individual businesses.