Dolby Digital Plus and Dolby Digital were selected...

Dolby Digital Plus and Dolby Digital were selected as optional technologies for China’s DTV receiver spec for set-top boxes and TVs that will take effect Nov. 1, Dolby Labs said. “We view this outcome as a positive for Dolby, as China this year will become the largest LCD TV market in the world,” said John Vinh, analyst for Collins Stewart. Near-term, the announcement isn’t expected to have any material impact on Dolby revenue because the technology has been selected as an optional specification, he said. Long term, however, he sees a “meaningful opportunity,” citing history in Europe where Dolby was not originally mandated as an audio spec but now commands a 90-plus percent market share. Over time, a similar scenario should play out in China since the company already has more than 15 broadcasters in China broadcasting in Dolby Digital, Vinh said. Among the Chinese broadcasters that have adopted Dolby Digital Plus are Shenzhen Media Group on terrestrial, Jinan Cable and BesTV for its IPTV platform, Dolby said. China-based IC companies NationalChip and HiSilicon are also incorporating Dolby Digital Plus into their chipsets for HD set-top boxes, Dolby said. More than 50 device makers including TCL, Changhong, Huawei, Juizhou and Coship have incorporated Dolby Digital Plus into their HD set-top boxes or HDTVs, it said. Using DisplaySearch research forecasting 60 million LCD TV units shipping in China in 2014, Vinh said a 70 percent attach rate would translate to about $0.25 per share in incremental earnings for Dolby. He cited concerns about “leakage and compliance” in China, but said the inclusion of Dolby in the official spec “will make it easier for the company to collect royalties.” Taking into account anticipated leakage, Vinh said, “We note that the company has successfully collected on royalties in China on DVD players for years.”