M+E Connections

Dolby CEO: Company Made Strides With Atmos, Vision, Dolby.io in Q2

Dolby continued to make strides with Dolby Atmos, Dolby Atmos Music, Dolby Vision and Dolby.io adoption in the second quarter (ended March 26), according to Kevin Yeaman, the company’s CEO and president.

“With another strong performance in licensing revenues this quarter, we are off to a solid start to our fiscal year,” he said May 4 in an earnings call, noting first half fiscal 2021 revenue grew about 10% compared to the first half of fiscal 2020, while earnings have “grown at an even higher rate.”

The results “reflect the strength of Dolby’s business model and the broad adoption of Dolby technologies across the devices and services that consumers are seeking to enjoy their content,” he said.

Dolby continues to see “new opportunities to expand the adoption of Dolby Atmos to a broader range of devices and services,” he told analysts. For example, he noted that Lucid Motors announced in Q2 that it will bring its first automobile to market including Dolby Atmos. The Lucid Air will enable the Dolby Atmos Music experience for the car and represents the “first example of a significant opportunity to address the primary entertainment use case within automotive,” he said.

Meanwhile, a growing number of albums and songs are being made available in Dolby Atmos Music, including many recent Grammy-nominated artists, including Taylor Swift and Lady Gaga, he said. During Q2, the India streaming service Hungama started supporting Dolby Atmos Music, joining Amazon Music and Tidal, he noted.

Momentum in Video Games

“As we continue to build on the momentum for Dolby Atmos for music, we see opportunities for more services to adopt Dolby Atmos, and to deepen our adoption across mobile, PCs, automotive and headphones,” Yeaman told analysts, adding: “Gaming is another area where we see much of the opportunity ahead of us to bring Dolby Vision and Dolby Atmos to a growing number of experiences.”

Microsoft’s Xbox will be the first video game consoles to support the combined Dolby experience for games, he said. New Xbox gaming headsets will be released this quarter from Microsoft and Bang & Olufsen that highlight support for Dolby Atmos, he pointed out.

There was also the first eSports event in Dolby Vision and Dolby Atmos during Q2. As part of Activision/Blizzard Entertainment’s BlizzCon Online, Dolby “enabled an event that showcased Overwatch matches to be viewed in the combined Dolby experience through PCs and gaming consoles,” Yeaman noted, adding: “eSports gives us unique opportunities to engage gamers by bringing Dolby Vision and Dolby Atmos to the experiences that they are passionate about…. By expanding our presence in music and gaming, we addressed two of the primary use cases on a mobile device.”

Wins in India, China and Beyond

In another adoption win for Dolby, India podcast service Earshot became the first podcast app to support Dolby Atmos, Yeaman pointed out, noting that service will be making Atmos content available across different genres of podcasts and in multiple languages.

“As we continue to expand the relevance of Dolby Vision and Dolby Atmos across a broader range of content, we address more of the use cases for mobile devices, driving the reasons for deeper adoption with our partners,” he explained.

This quarter, meanwhile, Chinese manufacturer Xiaomi launched its first mobile phones supporting Dolby Vision and Dolby Atmos, he also said, noting that “adds to the growing number of partners that support the Dolby experience within mobile,” including Apple, whose iPhone 12 lineup features the combined Dolby Vision and Dolby Atmos experience.

Oppo, Samsung and Sony also “continue to highlight Dolby Atmos with the recent launch of their latest flagship models,” he said.

Continued Strength in the Living Room

All of that “progress adds to our strong position within movie and TV content, which continues to drive more device adoption within the living room,” Yeaman told analysts. For example, “this quarter, Samsung released their Q7 sound bar highlighting support for Dolby Atmos.”

In TVs, meanwhile, Dolby manufacturing partners around the world, including Xiaomi and Skyworth released new models that support the combined experience also, he said. In addition to supporting Dolby Atmos, TCL and Hisense also highlighted support for Dolby Vision IQ within their recent TV launches, he noted, referring to the new feature that enhances the High Dynamic Range on a TV based on the content and ambient light in the room.

“With this momentum, we still see a significant opportunity ahead to reach higher levels of adoption with Dolby Vision and Dolby Atmos in the living room, similar to the broad presence of our core audio technologies,” he told analysts.

The adoption of Dolby Vision and Dolby Atmos on devices is being “driven by a consistent flow of new titles that are being enabled in the combined Dolby experience,” he said. Dolby streaming partners, including Netflix, Disney Plus, Apple TV Plus and HBO Max, “continue to make a broad range of titles available in Dolby, and the combined experience is consistently highlighted with the release of their latest tentpole titles,” he told analysts.

Signs of Hope for Theatrical

Meanwhile, although the Dolby Cinema business has suffered from the COVID-19 pandemic, there are signs to be optimistic about as more movie theaters open around the globe.

“We now have about 90% of our Dolby Cinemas opened globally to certain capacity restrictions,” Yeaman said. “Our engagement with exhibitor partners remains strong as we recently added a new Dolby Cinema partner in China, and we also had four new Dolby Cinema locations opened during the quarter.”

Dolby is also seeing “initial signs of strong box office performance” from theatrical movie releases including Godzilla vs. Kong and successful local content in China that he said were all available in Dolby Cinema, he told analysts.

Movies to be released later this year in Dolby Cinema include Black Widow, A Quiet Place Part II and Top Gun: Maverick, he noted.

The Dolby.io-Box Pact

The major win for the new Dolby.io. application programming interface (API)-based developer platform was the completed integration with Box that was announced the same week as the earnings call.

That partnership is “going to enable [Box] customers that enable the Dolby integration to have their users able to improve their content easily right where they store their content,” Yeaman said during the Q&A.

Dolby has also “seen a lot of interest in the media and entertainment space,” he said, noting “Box has a very large presence” in that sector. “This is going to allow them to improve their audio much more easily and with a broad range of content,” he said.

As Dolby looks ahead, “we also see opportunities where real-time interactions come together with recorded media and we can uniquely provide comprehensive solutions by embedding both our interactivity and media APIs,” he told analysts. “With Dolby.io, our technologies are beginning to address a much larger world of content experiences and interactions. All of this gives us confidence in our ability to drive revenue and earnings growth into the future.”

PC on Top in Licensing

Dolby also announced that Lewis Chew, its CFO and executive vice president, is retiring later this year and it was starting to search for his replacement.

In licensing, PC was the big winner for Dolby in the quarter. PC represented about 17% of total licensing in Q2, up about 12% from a year ago “due to higher market volume, along with increased adoption of Dolby Vision and Dolby Atmos,” Chew said on the earnings call.

Sequentially from Q1 this year, PC was up by about 56%, “driven by timing of revenue under contracts, along with seasonally higher activity from patent programs,” he said.

Broadcast, meanwhile, represented about 35% of total Dolby licensing in Q2 and  mobile about 22% of total licensing and consumer electronics about 16%, he noted.

Other markets represented about 10% of total licensing in Q2 and was up about 14% from a year ago, “driven by higher revenue from gaming and automotive,” he told analysts.