Dolby Chief Pushes 'Combined Experience' Theme, as Atmos, Vision Support Grows

Dolby CEO Kevin Yeaman hailed “the combined experience” of Dolby Atmos and Dolby Vision on the company’s fiscal Q3 earnings call Wednesday, highlighting the Apple TV 4K as the first digital media adapter (DMA) to support Dolby Atmos and Dolby Vision.

Referencing momentum with the combined experience, Yeaman noted Microsoft announced this month it will support the Dolby Atmos and Vision formats on Xbox One, and Sharp became the first company to announce the “combined Dolby experience” on a smartphone when it launched in Japan last month through NTT Plala. TV companies offering both formats include LG, TCL and Hisense, he said, and over-the-top providers Netflix, Vudu, Rakuten, Tencent and the iQiyi video platform in China support content in Atmos and Vision.

Yeaman noted Tom Clancy's Jack Ryan, an Amazon Prime original, will be the first title in Dolby Atmos and Prime Video. Dolby is seeing more adoption in live broadcast, including the World Cup, carried in Dolby Atmos by broadcasters in Brazil, Russia and China. Dolby Vision was part of live sports trials at the French Open, available on iOS devices and Apple TV 4K, he said. Also at the French Open, Dolby trialed Dolby Atmos and AC-4 livestreaming to Samsung and Huawei phones. Lenovo launched two new PCs with the Dolby Atmos speaker system this quarter, Yeaman said, with Dolby partnering on the subsystem layout and speaker design.

Alibaba's Youku Tudou streaming service recently began streaming in Dolby Vision, making the HDR format now available via the top three OTT services in China, Yeaman said. Dolby has nearly 15 Dolby Vision TV partners, with models as low as $350, he said, and more Dolby Vision Blu-ray players are coming to market from Sony, Panasonic and LG.

Dolby’s Q3 revenue was $317 million, up from $305 million in the year-ago quarter, with $286 million from licensing and $31 million from products and services, it said. Mobile devices were 23 percent of licensing in Q3, up 20 percent year on year, on “significant wins”: Apple's adoption of Dolby Vision, and Samsung and Huawei adopting AC-4 and Dolby Atmos on their phones, said Yeaman.

PC represented about 17 percent of licensing, up slightly vs. Q3 last year on higher volume offset by declining average selling prices, said Chief Financial Officer Lewis Chew. CE was 14 percent of Q3 licensing, up 8 percent year on year, driven by higher DMA activity. Licensing in other markets was about 13 percent of licensing, up 3 percent year on year to higher revenue from Dolby Cinema, Voice and gaming, while automotive declined, Chew said.

Broadcast, down 11 percent sequentially and 7 percent year on year, was about a third of licensing in the quarter, due to lower volume of TVs and set-top boxes, said Chew. Dougherty & Co. analyst Steven Frankel said Dolby, along with Universal Electronics, has seen headwinds from delayed rollouts of next-generation solutions, likely including Atmos and/or Vision, and the short-term impact of Comcast paring back orders in anticipation of its scuttled bid for Fox. (see 1807190022)

Dolby's goal is to return to double-digit growth and Yeaman cited strength in the company’s core audio business and new initiatives as part of the path. In a Thursday research note to investors, Frankel called Dolby “one of the highest quality companies we have come across,” saying the company “dominates its business,” generates more than $200 million annually in free cash flow and is in early stages of a “renewed growth spurt.” Shares closed up 4.4 percent Thursday to $67.36.