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Dolby continued to see strong momentum for Dolby Atmos and Dolby Vision and saw positive signs across its growth initiatives overall in the fourth quarter and fiscal year (ended Sept. 24), according to Kevin Yeaman, the company’s CEO and president.

“Looking at the full year, we had a strong fiscal 2021, with 10 percent revenue growth and our highest operating margins since fiscal 2014, and we created considerable momentum across many of our growth initiatives that will allow more people to be entertained by premium Dolby experiences,” he told analysts on an earnings call Nov. 16.

He pointed to several examples of that momentum, noting: “Consumers can now easily record, edit and share their videos in Dolby Vision with their Apple iPhone. Music in Dolby is being enjoyed by a significantly larger audience with the launch of Dolby Atmos on Apple Music and we have the first partners who will enable the Dolby Atmos music experience in the car with Mercedes-Benz and Lucid Motors. And gamers can now play some of their favorite titles in Dolby Vision for the first time on the latest Xbox.”

Mercedes-Benz announced in October that it would be offering Dolby Atmos in two of its top luxury cars, the Mercedes-Maybach and the Mercedes-Benz S-Class.

Lucid Motors announced in Q2 that it planned to bring its first automobile to market including Dolby Atmos. The Lucid Air would 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,” Yeaman said in May, on Dolby’s second-quarter earnings call.

The latest win for Dolby on the automotive front came only a few hours before the Q4 earnings call, when Chinese electric car maker NIO said it is including Dolby Atmos as a standard feature on all of its smart flagship ET7 sedans.

“These new partnerships add to our early momentum within automotive that started with Lucid Air earlier this year, which is now on the road in the U.S.,” Yeaman said on the Q4 call, adding: “We are just at the beginning of the significant opportunity we see ahead in this space.”

During Dolby’s fiscal year 2021, its revenues “benefited from robust increases in consumer device shipments, combined with increased adoption of Dolby Atmos and Dolby Vision, partially offset by a decrease in cinema-related revenues,” he said. The company continued to be impacted by the slowdown in theatrical film releases and consumer attendance as a result of the pandemic.

However, Yeaman said: “As we enter FY 2022, we are expecting revenue growth in the mid to high single digits as we anticipate a shift in those factors with accelerating growth of Dolby Atmos and Dolby Vision and a partial recovery in cinema-related revenues offset by a macro slowdown in consumer device shipments.”

Dolby.io Strides Made

The company, meanwhile, continues to see an “opportunity to expand our addressable market with initiatives like Dolby.io,” he said.

Dolby scored a major win for the new Dolby.io. application programming interface (API)-based developer platform earlier this year through a completed integration with Box.

With Dolby.io, Dolby sees an “opportunity to greatly expand our addressable market by focusing on use cases that benefit from Dolby’s unique experience in media and communications,” Yeaman told analysts Nov. 16. “While our platform has broad applicability across a range of use cases, we are focusing where we think we can offer the most differentiation: virtual live performances, online and hybrid events, social audio, premium education, gaming and content production. Each of these verticals represents an opportunity of hundreds of billions of minutes annually and, collectively, we estimate the addressable market to be about $5 billion and growing.”

Dolby is “enabling higher quality capture, processing and playback capabilities compared to what is currently available in the market,” he explained. “Last quarter, we released a major platform update which puts us in a position to address more of our potential customers’ needs by making our APIs more competitive on the number of concurrent users we can support. As we focus our target use cases and learn from our engagement with developers, we continue to introduce new APIs and features that address the needs of developers and improve the overall developer experience.”

With those recent improvements, Dolby is “beginning to see increased self-service activity and, with our new leadership in place, we are focused on increasing awareness and building the pipeline,” he told analysts. “This quarter, we saw a number of new music distribution services, including UnitedMasters, integrating our music mastering API and enabling their users to create high-quality music tracks.”

Although Dolby is “still in the early days of Dolby.io, we are excited about the significant opportunity ahead,” he added.

Foundational Audio Tech Still a Factor

Meanwhile, the company’s “foundational” audio technologies, including Dolby Digital Plus, AC-4 and its audio patent licensing, represented about three-quarters of the company’s licensing business in FY 2021 and have “high attach rates across a diverse set of devices and end markets,” Yeaman said.

In FY 2021, revenue from those foundational audio technologies grew about 11% year-over-year, “due largely to robust global shipments of PCs and higher TV volumes, particularly in North America and Europe,” he said.

The remainder of Dolby’s licensing revenue includes Dolby Atmos, Dolby Vision and its imaging patent technologies, where he told analysts “growth is being driven primarily by new adoption and new licensees.” This portion of Dolby’s licensing revenue also includes Dolby Cinema, “where we expect strong year-over-year growth as box office recovers from low attendance throughout FY 2021, driven by the pandemic,” he noted.

In total, that portion of its business is approaching 25% of Dolby’s licensing revenue and grew almost 20% in FY 2021, he said, adding: “We see this growth accelerating to over 35 percent in FY 2022.”

The “continued momentum” being seen with Dolby Vision and Dolby Atmos is a “key driver here,” he told analysts.

The company continues to see a strong response to Dolby Atmos Music from artists and consumers, he also said.

Dolby recently launched a new venue, Dolby Live at Park MGM, where he said concert attendees can “enjoy their favorite artists with the ultimate Dolby Atmos Music experience and then seek the experience in all the ways they enjoy music.”

Amazon Music, meanwhile, recently announced it’s making Dolby Atmos music experiences more broadly available to subscribers, he noted.

It is Dolby’s “growing presence” in music that he said “created a new value proposition for Dolby in the automotive space.”

Dolby Sees Vision Growing

As the amount of Dolby Vision content being created through the Apple iPhone continues to significantly grow, “we are seeing a range of content platforms now enabling support for Dolby Vision for the first time,” Yeaman told analysts.

Vimeo recently became “the first all-in-one platform to support playback of Dolby Vision content for the Apple ecosystem,” he also pointed out.

“With more content platforms supporting Dolby Vision content to broader audiences and use cases, we look to drive increased adoption of Dolby Vision playback and capture across more devices, particularly in mobile and PC,” he said.

Dolby is also “building momentum to enable more live broadcast events” using its technology, he told analysts, noting Comcast delivered the 2021 MLB World Series and playoff games in Dolby Vision on Fox Sports. Thursday Night Football games will be available in Dolby Vision via Fox and NBC will broadcast select college football games in Dolby Vision, he said.

“Growing the number of Dolby content experiences, especially live content with dedicated followings, provides more impetus for greater adoption of Dolby Vision and Dolby Atmos,” he said.

Gaming in Dolby Vision is now available on the Xbox series X and S video game consoles, “marking the first time gamers can enjoy playing in the combined Dolby experience,” he went on to say. Microsoft also expanded its support of the combined experience by adding Dolby Vision to its Surface devices, he pointed out.

In the living room, meanwhile, “we see our partners like Amazon, Xiaomi, TCL and Sky highlight the combined Dolby Vision and Dolby Atmos experience in their latest TV launches and we continue to garner support from streaming services with Hulu adding Dolby Vision this quarter,” he said.

Overall Results

Dolby reported total revenue grew to $285 million in Q4 from $271.2 million in Q4 a year earlier. For fiscal 2021, Dolby reported revenue increased to $1.28 billion from $1.16 billion a year earlier.

Fourth quarter income grew to $44.2 million, (42 cents per diluted share) from $26.8 million (26 cents per diluted share) in Q4 a year earlier. Fiscal 2021 income jumped to $310.2 million, ($2.97 per diluted share) from $231.4 million, ($2.25 per diluted share).