When Milo Janus starts the movie for his party guests, the take-up reel holds about two-thirds of the movie, while the supply reel (front) only one-third. In other words, the movie is already about two-thirds finished.
Furthermore, he had earlier mentioned to Buddy that this was going to be an "uncut X rated" film. The one being shown does not even remotely resemble that kind of film. The group he has over does not appear to be the type to watch that type of film either.