Dolby Labs and DTS royalty fee growth is being hampered by...

Dolby Labs and DTS royalty fee growth is being hampered by Chinese TV set makers that are implementing audio codecs in firmware, thus sidestepping Dolby and DTS chip audits Collins Stewart said in an investment report. The report said set makers have been producing TVs with the codec technology but “have not fully reported all TVs shipped with the companies’ codecs.” Dolby and DTS are “likely already aware” of the issue and may have reflected it in forward guidance, the report said, adding that the practice “may limit more meaningful near-term revenue growth opportunities.” Dolby and DTS have dealt “successfully” with similar issues with DVD players in the past, it said. If Dolby and DTS were able to reinforce compliance of royalty payments, it would represent a “significant revenue opportunity,” Collins Stewart said, estimating the attach rates of multimedia TVs in China to be more than 70 percent. In response to the report, a Dolby spokesman told us the company values its brand and intellectual property, and China is a market of “strategic importance.” Dolby “works closely with licensees, retailers, industry associations and government organizations to protect our assets, support fair competition and ensure a level playing field,” he said. DTS did not respond by our deadline.