28 CFR Parts 35 and 36, Nondiscrimination on the Basis of Disability by Public Accommodations - Movie Theaters; Movie Captioning and Audio Description (NPRM)

d.  Estimated Cost of Compliance for Small Entities⁵¹

The SBA/U.S. Economic Census data was incorporated into the Initial RA’s estimation for impacts on small businesses.  First, receipt data was used to develop assumptions regarding the distribution of “small businesses” among the four theater size types.  The assignment of theater size type is critical to the estimation because it determines the number of screens and, therefore, total costs per establishment. 

Using the Initial RA cost model estimation of the number of theaters by size type in 2015, the IRFA distributed the number of establishments of small business movie theater firms beginning with all Single Screen establishments and then applied the remaining portion to Miniplex and Multiplex establishments.

2015 Distribution of Theaters (Model Projection)

Theater Size Type	Number of Theaters	Percentage
Megaplex	718	14.1%
Multiplex	1,893	37.1%
Miniplex	1,500	29.4%
Single Screen	996	19.5%
TOTAL	5,107	100%

For this distribution, Single Screen theaters made up 89.6 percent of establishments in the smallest revenue category.  The remaining establishments in this category were assumed to be Miniplexes.  All of the establishments with receipts between $500,000 and $4,999,999 were assumed to be Miniplex theaters.  After allocating those theaters, the remaining Miniplex theaters estimated for 2015 were distributed to the largest revenue category.  Because there were more theaters in the largest revenue category than the remaining estimated Miniplex theaters, the other theaters in this revenue category were assumed to be all Multiplexes (approximately 41 percent).  These distributions are summarized below.  These distributions were then used to estimate the average cost per firm in each of the three consolidated small business revenue categories.

Distribution of Theater Size Type for Consolidated Revenue Groups

Consolidated Revenue Group52	Theater Size Type
$499,999 and under	89.6% Single Screen, 10.4% Miniplexes
$500,000-$4,999,999	100% Miniplexes
$5,000,000 to $35,500,000	58.8% Miniplexes; 41.2% Multiplexes

Theater Equipment Requirements Based on Scoping and Theater Size

Equipment	Megaplex Avg: 18 Screens	Multiplex Avg: 11 Screens	Miniplex Avg: 4 Screens	Single Screen
Captioning Hardware and Devices
Captioning Hardware Needed	18	11	4	1
Captioning Devices Needed	34	28	12	4
Descriptive Listening Hardware and Devices
Audio Hardware Needed	18	11	4	1
Audio Devices Needed	18	11	4	2

Using the average costs per theater developed in the Initial RA, we were able to calculate the average costs per theater and per firm for the three consolidated revenue groups ($499,999 and under; $500,000-$4,999,999; and $5,000,000-$35,500,000).  Costs were first calculated on a per-establishment basis, and then using the average number of establishments per firm for each of the three consolidated revenue groups, translated into an average per firm cost.  This cost was then compared to the average receipts per firm for that consolidated revenue group.

The resulting ratio of average costs to average receipts ranges from a low of 0.7 percent (for digital firms with revenues of $5,000,000 to $35,500,000) to a high of 5.7 percent (for analog firms with revenues of $499,999 or less).  The impact on firms with digital projection is comparatively smaller than the impact on firms maintaining analog projection.  The ratio of average costs/receipts is estimated to range from 0.7 percent to 2.1 percent for all movie theater companies using digital systems.  In contrast, the same ratio ranges from 2.0 percent to 5.7 percent for all firms using analog projection.

Estimation of Costs for Small Movie Theaters, By Firm Size, Based on 2015 Size/Revenue Distribution

Cost	Firms $499,999 and under	Firms $500,000 to $4,999,999	Firms $5,000,000 to $35,500,000**
Digital
Average receipts per firm*	$188,384 to $201,973	$1,471,549 to $1,484,995	$9,705,377 to $12,437,259
Average cost per theater*	$3,198 to $3,966	$10,063 to $10,586	$13,984 to $17,281
Average cost per firm*	$3,233 to $3,992	$12, 539 to $14,454	$81, 176 to $103,309
Ratio of average cost/receipts*	1.6% to 2.1%	0.8% to 1.0%	0.7% to 1.1%
Analog
Average receipts per firm*	$188,384 to $201,973	$1,471,549 to $1,484,995	$9,705,377 to $12,437,259
Average cost per theater*	$8,172 to $10,638	$30,204 to $31,884	$43,449 to $54,673
Average cost per firm*	$8,263 to $10,706	$37,638 to $43,534	$252,224 to $326,844
Ratio of average cost/receipts*	4.1% to 5.7%	2.5% to 3.0%	2.0% to 3.4%

* The ranges represent the figures calculated using the two datasets created from data from the 2007 Economic Census, which breaks out data by revenue category (downloaded from SBA’s Web site (http://www.sba.gov) and the Census Bureau’s American FactFinder Web site (http://factfinder2.census.gov/faces/nav/jsf/pages/index.xhtml), respectively), but which differ slightly.  Note that the composition of theater size types also varies per revenue group depending on the dataset used, and therefore the average cost per theater varies as well.

** Note that the calculations for this category using the dataset downloaded from the SBA Web site do not include any data for the two firms in the revenue category for firms with sales/receipts/revenue of $30,000,000-$34,999,999 because no data on annual receipts for those two firms was included.  The dataset downloaded from American FactFinder had different revenue categories from those downloaded from SBA’s Web site.  To estimate those firms meeting the SBA size standards using the dataset downloaded from the American FactFinder Web site, all the firms with revenues less than $25 million, and half of those with revenues from $25,000,000 to $49,999,999 were counted as a way of estimating the number of entities that fall under $35.5 million within that revenue category.

Average capital costs per theater type were estimated by multiplying the number of screens by the required analog or digital equipment and the scoped number of devices.  These average costs are presented below.

Estimated Average Receipts and Costs per Firm, Digital and Analog

Based on data from Small Business Administration, Statistics of U.S. Businesses, Business Dynamics Statistics, Business Employment Dynamics, and Nonemployer Statistics, available at  http://www.sba.gov/advocacy/849/12162 (data downloaded Dec. 2013).  See Table 38 in the Initial Regulatory Assessment and Initial Regulatory Flexibility Analysis (available at http://www.ada.gov) for more information on how the figures in this table were calculated.

Digital Captioning Equipment Unit Costs

Technology	Digital Captioning Hardware Cost (one needed per screen)	Digital Captioning Individual Device Costs (multiple per screen/theater may be needed)	Digital Audio Description Hardware Cost (one needed per screen)	Digital Audio Description Individual Device Costs (multiple per screen/theater may be needed)
Doremi’s CaptiView	$690	$430	$625	$125
USL	$1,057	$479	$0	$69

Analog Captioning Equipment Unit Costs

Technology	Analog Captioning Hardware Cost (one per screen needed)	Analog Captioning Device Costs (multiple per screen/theater may be needed)	Analog Audio Description Hardware Cost (one per screen needed)	Analog Audio Description Device Costs (multiple per screen/theater may be needed)
Rear Window53	$7,113	$95	$467	$106

Average per Establishment Costs of Purchasing Digital Closed Captioning and Audio Description Equipment

Cost Per Digital Theater	Doremi	USL	Average Digital Cost
Megaplex*	$40,540	$36,554	$38,547
Multiplex	$27,880	$25,798	$26,839
Miniplex	$10,920	$10,252	$10,586
Single Screen	$3,285	$3,111	$3,198

* Note that the Initial RA assumes that no small business firm has Megaplexes; this data is presented for informational purposes only, to help illustrate the differences in average costs per digital theaters by type.

Average per Establishment Costs of Purchasing Analog Closed Captioning and Audio Description Equipment

Cost Per Analog Theater54	Rear Window
Megaplex	**
Multiplex	**
Miniplex	$31,884
Single Screen	$8,172

** Note that the Initial RA assumes that all Megaplexes and Multiplexes have transitioned to digital projection systems by the time this rule goes into effect.

Question 19: Small Business Compliance Costs
The Department seeks comment and data on the small business compliance cost estimates, including the costs associated with procuring and maintaining digital and analog equipment, the availability of this equipment, estimates of the average cost of this proposed rule by establishment and firm, and the ratio of average costs of this proposed rule to firm receipts.  The Department is interested in comment on whether small theaters will incur higher prices in the purchase and installation of this equipment due to the lower volume needed.  The Department also seeks public comment on its proposed scoping for individual captioning devices.  Should the Department consider approaching scoping differently for small theatres?  How so and why?  (Please see Question 10 for additional questions about scoping for captioning devices).  How many devices capable of transmitting audio description to individuals should each movie theater have on hand for use by patrons who are blind or have low vision?  (Please see Question 12 for additional questions about scoping for audio description).  Do small theaters face any additional costs not already included in these cost estimates?  The Department seeks comment and data on what, if any, particular requirement of this rule would cause a small business to claim that it is an undue burden to comply with the requirements of this proposed rule.

51. This estimate of costs for small businesses assumes that the Department would proceed under Option 1 (four-year compliance date for analog screens).  If the Department decides to adopt Option 2 for the final rule and defer application of the requirements of the rule for analog screens, the costs for small businesses will be significantly less because the rule will only apply to small business digital theaters.

52. The distribution is slightly different using the dataset from American FactFinder: For firms with revenue $499,999 and under, 100 percent were assumed to be Single Screen; for those with revenue $500,000-$4,999,999, 7 percent were Single Screens and 93 percent  Miniplexes; for those with revenue $25,000,000 to $35,5000,000, 79 percent were Miniplexes and 21 percent Multiplexes.

53. The hardware required for Rear Window technology includes a LED display necessary to show captions in each analog projection auditorium, a Datasat/DTS XD20 interface, and individual Reflectors that are used by patrons. The cost for the LED display ranges from $2,850 to $3,975, depending on whether it is a 2- or 3-line display (a 2-line display is recommended); the LED display cost used in Regulatory Analysis is an average of the cost of the two sizes of display.  The Datasat/DTS XD20 interface, which is an interface connecting the Rear Window LED display to the theater system, costs about $4,200 per auditorium. The only device for individual use is the Rear Window Reflector, which fits into cup holders and costs $95 each.  (Note: all these prices are taken from the “Rear Window® Captioning (RWC) Components Cost Overview” released by Median Access Group at WGBH August 2010, and adjusted for the fact that licensing fees are no longer required.)  For audio description, the Williams Sound Audio System is compatible with analog captioning systems and was used to estimate video description equipment costs for analog systems.  The Williams Sound Audio System requires an audio transmitter for each auditorium, which costs $467.  Patrons may use a receiver and a headset, which cost $88 and $18, respectively.

54. Note that in the main Initial RA, all of the Megaplexes and Multiplexes are assumed to have converted to digital projection.  This assumption was made because NATO had estimated at a Congressional hearing in May 2013 that 88 percent of screens in the nation now have digital projection, making it very unlikely that any large theater complex remains analog.  If any Megaplexes and/or Multiplexes stayed with analog projection, their average costs for purchasing analog closed captioning and audio description equipment would be $141,578 and $87,206, respectively.