Dolby Seeking to Ride iPhone 12's Dolby Vision Embrace, Says CEO

Apple’s “embracing the ability” to capture, share and edit content in Dolby Vision in iPhone 12 models shows how “the Dolby experience can apply far beyond even those more traditional forms of content,” said CEO Kevin Yeaman on a Thursday investor call. Dolby Vision continues to be a growth area for the company, said the executive, estimating the HDR technology is in 15%-20% of 4K TVs. In the last fiscal year, 4K models were just over 50% of the TV market for Dolby, he said.

The company is winding down and exiting conferencing hardware sales, said Yeaman. It's focusing now on Dolby Voice through software on the Dolby.io platform that's designed to give developers the tools to enhance content with high-quality sound with a minimal amount of code. The company is seeing growing engagement with Dolby.io from developers in a range of uses including podcasts, media production, online marketplace videos, online education, social media and livestreaming applications, he said. It recently partnered with SoundCloud to enable artists to improve quality of their tracks; some 200,000 tracks have been mastered using Dolby software since launch.

Dolby’s Other business revenue plunged 19% year on year on “significantly lower” Dolby Cinema box office share due to COVID-19 restrictions and lack of big titles, said Chief Financial Officer Lewis Chew. Lower revenue from gaming also factored in to lower Other business revenue, ahead of gaming console refreshes, said Chew. Xbox is supporting Dolby Vision and Dolby Atmos for gaming in the next gaming cycle, the first gaming console to do so, Yeaman noted.

Responding in Q&A to whether the promise of a coronavirus vaccine spurred conversations for Dolby Cinema screens and equipment with theater partners, Yeaman said, “none of us know when the industry is going to recover.” Most screens are open but attendance is affected by social distancing restrictions and timing of titles, Yeaman said. “Studios will keep creating great movies,” and audiences will want to view them with the “best experiences," he said: "We just can't right now predict any better than anybody else when … that day is going to come.”

Dolby’s fiscal Q4 revenue fell 9% year on year to $271 million, and year-on-year revenue dropped 6% to $1.2 billion mostly due to COVID-19, said Chew. The company beat the high end of guidance for the quarter, $255 million. Quarterly revenue improved by $24 million vs. Q3 on higher unit volumes in TVs, set-top boxes, digital media adapters and PCs, he said. Overall licensing revenue growth slipped 3% for the quarter and year.

Broadcast was 47% of Q4 licensing, up 2% year on year, due in part to higher adoption in TVs and set-top boxes, Chew said. Mobile was about 15% of total licensing, down 13% over last year, but the company had higher adoption of its technologies in mobile devices. CE was 13% of Q4 licensing, PC 12%.

Despite continued headwinds in its cinema-related business, Dolby “significantly exceeded Q4 expectations,” Colliers analyst Steven Frankel wrote investors Friday, saying “the best is yet to come” as the business benefits from 4K TVs and set-top boxes, new gaming platform launches and growth of the Dolby.io platform. Shares closed 7% higher Friday at $87.20.