Dolby Laboratories, Inc. designs and manufactures audio, imaging, accessibility, and other hardware and software solutions primarily for the cinema, with occasional applications in the television, broadcast, and live entertainment industries.
The company is in the business of improving the entertainment experience by inventing and innovating technology that advances audio and video. The company enables highly compelling experiences in movies and TV shows, music, sports and more by meeting the n...
Dolby Laboratories, Inc. designs and manufactures audio, imaging, accessibility, and other hardware and software solutions primarily for the cinema, with occasional applications in the television, broadcast, and live entertainment industries.
The company is in the business of improving the entertainment experience by inventing and innovating technology that advances audio and video. The company enables highly compelling experiences in movies and TV shows, music, sports and more by meeting the needs of content creators, distributors and consumer electronics manufacturers. The company has been at the forefront of multiple audio and video revolutions over the last sixty years, including the transitions from mono to stereo then surround, analog to digital, and terrestrial broadcasting to streaming.
Dolby is synonymous with high quality entertainment from a consumer perspective and has become critical to makers of consumer electronic devices as the company’s technology is an important component of the creation and delivery of audio and video content. While some of the company’s technology represents relatively elemental functions like audio signal compression that enable playback, the company also offers technology that is innovating in emerging categories, including spatial audio and high contrast video. The company derives the majority of its revenue from licensing audio and video technology to electronics manufacturers, and a lesser portion of the company’s revenue by offering premium audio and video technologies to cinema exhibitors.
Strategy
The key elements of the company’s strategy include advancing the science of sight and sound; delivering superior creative experiences; building ecosystems that benefit from and sustain demand for the company’s solutions; and expanding the reach of the company’s technologies.
Products and Revenue Generation
The company generates most of its revenue by licensing technology, the company’s brand, and patents to device manufacturers, and selling cinema hardware and services to movie exhibitors.
Licensing
The two primary components of the company’s licensing business are Branded Technologies which include Branded Audio Codecs, Dolby Atmos & Dolby Vision, and Patents, which include Audio Patents and Imaging Patents.
The company generated over 90% of its revenue in the year ended September 27, 2024 (fiscal 2024) by licensing branded technology and patents that enable 1,000 electronic device manufacturers to enhance the audio and visual capabilities of their products by incorporating the company’s technology.
Branded Technology Licensing
Dolby branded technologies enable compelling audio and video experiences for consumers and offer seamless integration and reliability in devices in which they are incorporated. Dolby branded technologies enjoy widespread adoption, are occasionally mandated as standards, and are frequently considered fundamental to a wide variety of devices and types of entertainment content, including movies, TV shows, sports and music.
The company’s branded technology solutions are complete solutions. The company provides licensees with software, patent rights, and know how to enable content creation, delivery, and playback. The company’s branded offerings are distinguished by a focus on ease of adoption and deployment. Additionally, the company’s device partners derive value from the use of the Dolby brand, which is synonymous with high quality entertainment.
Dolby branded technologies are part of a unique and broad ecosystem that includes content creators, distributors (such as streaming media companies and broadcasters) and device manufacturers. Initial ecosystem adoption of these technologies yields a virtuous cycle. The more content made available using the company’s branded technologies, the higher the likelihood that more devices embed the company’s technology to facilitate the playback of that content. The more device manufacturers include the company’s technology, the more content creators and distributors want to make content available in Dolby formats.
Branded Audio Codecs
A significant portion of the company’s branded licensing is centered on audio codecs: compression and decompression technologies for audio. The most important of these are the following:
DD+. DD+ is an advanced surround sound audio codec technology that enables the Dolby audio experience across home theaters, smartphones, operating systems, and browsers. A versatile, bandwidth efficient and scalable home theater grade audio codec for A/V content, DD+ is designed to deliver up to 7.1 channels of surround sound across multiple platforms and content types. It is also able to carry channel-based configurations.
Dolby AC-4. Dolby AC-4 is an audio codec that uses cutting edge compression to deliver equivalent experiences at half the bitrate of DD+, its predecessor. Dolby AC-4 matches the delivery method with the optimal configuration, enabling encodes tailored for broadcast or streaming and catering for headphone or speaker playback. It is also capable of delivering enhanced, user-configurable, and accessible experiences. The Dolby AC-4 coding system utilizes new aspects of object audio for features like dialogue enhancement or commentator substitution.
Dolby Atmos and Dolby Vision
Dolby Atmos and Dolby Vision are Dolby’s next generation of branded licensing products. They represent significant innovations, and enable consumers to enjoy increasingly immersive audio and video experiences. Dolby Atmos and Dolby Vision include encoding technologies that artists use to create more compelling and immersive audio and video experiences, as well as a set of decoding technologies that device manufacturers include on their devices to decode the content the artists have created.
Dolby Atmos. Dolby Atmos is the evolution of surround sound technology that creates a three-dimensional audio experience with object-based sound technology with up to 128 audio objects that can be positioned anywhere to allow for precise placement and movement of sound in a three dimensional space. This is achieved by adding height channels and spatially encoded digital signals. Dolby Atmos can adapt to varied playback environments and devices, including stereo headphones, speakers, receivers, TVs, soundbars, AVRs and automotive systems.
Dolby Vision. Dolby Vision is a visual technology that uses HDR to improve the quality of images in movies, TV shows, sports and games. Dolby Vision is designed to make images appear more realistic by enhancing details in both dark and bright areas, and by increasing brightness, increasing the range of colors, and depicting deep blacks. It includes dynamic metadata that adjusts the picture based on a display's capabilities on a per-frame or per-shot basis.
A device must support Dolby Atmos and Dolby Vision to fully experience content in Dolby Atmos and Dolby Vision. Ecosystems for these products flourish because creatives appreciate that creating content using Dolby Atmos and Dolby Vision tools enables them to express their creativity in unique and compelling ways. Distributors see value in distributing this differentiated content. Device manufacturers understand that consumers want to enjoy content in the highest quality possible and will express a preference for devices with Dolby Atmos and Dolby Vision playback.
The amount of content created in Dolby Atmos and Dolby Vision is large and growing. In addition to strong momentum in music, TV shows and movies, the company is also seeing strong global momentum in user-generated content, audio books and live sports. This growing body of Dolby Atmos and Dolby Vision content provides device manufacturers with an incentive to license the company’s technology in order to make it available to their customers.
Revenue Generation
The company licenses its branded technologies via a direct sales force that works with approximately 1,000 consumer electronics manufacturers all over the globe. Licensing usually occurs in two stages. First, the company licenses to semiconductor manufacturers who incorporate its technologies in ICs that they sell to OEMs of consumer entertainment devices. These semiconductor licensees pay the company a nominal initial fee for use of its technology and the services that the company provides in their implementation process. Second, the company licenses OEMs, who are then authorized to purchase chips from the chip makers, and incorporate those chips into Dolby-approved products. In addition to the two-stage model, the company licenses directly to integrated chip and device makers.
From time to time, the company also generates revenue via recoveries (‘recoveries’), which is revenue attributable to unlicensed or under reported distribution of devices incorporating the company’s technologies in prior periods, usually recovered as a part of a settlement.
Patent Licensing
The company generates patent licensing revenue primarily from licensing Dolby-owned patents essential to standardized audio and video technologies. These technologies are fundamental to the capture, storage, transmission and playback of audio and video, and are embodied in billions of products sold each year throughout the world, including streaming devices, televisions, gaming consoles, automotive media consoles and security cameras.
Technology Standards
The standardized technologies at the core of the company’s patent licenses are generally developed in an open, collaborative process under the auspices of international standard-setting organizations like ETSI, ISO, IEC and/or ITU. Active participants are leaders in the field, and often include businesses (large and small), research institutes, and universities. Participants, including Dolby, contribute specialized expertise and/or technology with the goal of creating common industry solutions to address technical challenges. Given the collaborative and meritocratic nature of the standardization process, the resulting technology solution is both state-of-the-art and designed to meet the requirements of the market, increasing the likelihood of industry adoption.
For audio and video codecs, the standardization process is centered on creating interoperable solutions that work in a uniform manner despite increasingly complex device requirements. The resulting standardized technologies are intended to connect billions of disparate devices worldwide in a way that allows for seamless communication. These technology standards have played an essential role in advancing the technology of media capture, storage, transmission and playback through multiple generations of technological development. For example, the AVC codec helped enable standard-definition streaming over the internet, while the next-generation HEVC codec optimized streaming for higher-definition formats like 4K.
Looking forward, Dolby intends to continue to actively participate (both in standards bodies and independently) in the development of next-generation standardized audio and video technologies, and has begun in particular to explore the use of artificial intelligence in the development and use of audio and video codecs.
Key Current Programs
The majority of revenue from Dolby’s patent licensing comes from licensing standard essential patents associated with standardized AAC, AVC and HEVC codecs, each of which is described below.
AAC, HE-AAC and Extended HE-AAC. The AAC family of audio codecs comprises some of the most efficient audio coding technologies available today. These codecs are designed to provide high quality audio at lower bitrates than prior coding formats. The AAC family of codecs is widely deployed across most consumer media playback devices.
AVC. The AVC digital video codec is highly efficient and is widely implemented in video playback devices, including STBs, mobile devices, cameras, and broadcast television services and other products. AVC is the most widely deployed video codec used by broadcasters and video streaming companies.
HEVC. HEVC is a next-generation digital video codec that compresses video more efficiently than AVC, leading to an average bitrate reduction of up to 50%. HEVC enables the distribution of higher-quality video, such as 4K streaming. HEVC is especially useful for streaming video on mobile devices, where data usage and processing power are often limited.
In addition, the company licenses patents essential to other audio, video, and communications codec technologies, such as AV1, MPEG H, Opus, and VVC. These technologies and licensing programs are in earlier phases of technology adoption and licensing program maturity.
Revenue Generation
Given the collaborative nature of the standardization process, Dolby generally owns only a portion of the patent rights in the resulting standard. As such, patent licensing solutions are not Dolby-branded, and the company can directly offer licensees only a portion of the rights necessary to practice the relevant standard.
The company’s preferred solution to these ownership dynamics is the patent pool.
A patent pool is a collaborative structure administered by a patent pool administrator and consisted of multiple patent owners (referred to as licensors) who agree to jointly license their patents relevant to a particular technology. There can be dozens of licensors contributing IP to a patent pool for a standardized technology.
The company operates as licensors in patent pools administered by several patent pool administrators including Access Advance, Sisvel, Via Licensing Alliance LLC (‘Via LA’) and Vectis. The company is a majority stockholder and licensor in Via LA, which the company co-owns with Philips and Mitsubishi. The company holds a minority ownership interest in Access Advance.
The vast majority of the company’s patent licensing revenue comes from patent pools in the form of royalties, and a minority of the company’s patent licensing revenue is generated from bilateral licensing agreements between Dolby and licensees, with licensing fees negotiated directly with the licensee. The company also generates revenue from Via LA administration fees.
Dolby Cinema
The company leverages its universe of creative talent to bring the highest quality experiences to the company’s exhibitor partners. Dolby Cinemas are Premium Large Format (PLF) cinemas that deliver a Dolby branded premium cinema offering with Dolby Vision, Dolby Atmos, and a proprietary Dolby theater design. The company typically provides Dolby Cinema exhibitors with the requisite Dolby technology at minimal or no upfront cost and generate revenue from these sites through a share of box office receipts, which the company recognizes as licensing revenue. Dolby Cinemas deliver a unique, high-end theatre experience, that is different from competing PLFs, as well as the company’s exhibitor partner’s other theaters that use Dolby manufactured and distributed cinema hardware, including those that may utilize Dolby Atmos and/or Dolby Vision.
Products and Services
Cinema Imaging Products include digital cinema servers used to load, store, decrypt, decode, watermark and playback digital film files for presentation on cinema projectors. It also includes software used to encrypt, encode, and package digital media files for distribution.
Cinema Audio Products include cinema processors, amplifiers and loudspeakers used to decode, render and optimally play back digital cinema soundtracks, including those using Dolby Atmos.
In addition, the company offers various services to support theatrical and television production for cinema, broadcast, and home entertainment, including equipment training and maintenance, mixing room alignment, equalization, as well as audio, color, and light image calibration. The company also provides PCS for products sold and equipment installed at Dolby Cinema theaters operated by exhibitor partners and support the implementation of the company’s technologies into products manufactured by the company’s licensees.
Revenue Generation
The company generates revenue from Dolby Cinema Products by selling and leasing products to exhibitors, excluding Dolby Cinemas, and offering PCS to exhibitors.
Dolby.io
Dolby.io is powering the next generation of immersive, interactive, and social experiences with real-time engagement for live events, especially sports. Dolby.io leverages Dolby’s six decades of experience in the science of sight and sound to deliver 4K video with clarity, depth and detail via the company’s unique content delivery architecture that ensures a high quality, synchronized viewer experience across the globe. This enables the company’s customers to engage viewers effectively with near real time interaction tools that will strengthen connections and drive participation.
Revenue Generation
Dolby.io represents a departure from the company’s traditional distribution model which is focused on device manufacturers. Dolby.io is a software as a service (SaaS) product sold directly to enterprises via a consumption revenue model.
Sales and Marketing
The company’s marketing efforts focus on cultivating strong relationships with consumers, creators and the company’s partners in an effort to share how Dolby’s innovations in product and services transform entertainment experiences. The company sells its solutions primarily using an internal sales organization to various customers in the markets where the company operates. The company also licenses its technologies and IP indirectly through patent pools, where owners of IP covering technology standards aggregate their patents and offer the pooled patents to implementers through patent pool licensing administrators who are responsible for the sales and marketing of the pooled patents. The company maintains more than 20 sales offices in key regions around the globe.
The company promotes its solutions and the company’s brand through industry events such as tradeshows, film festivals, movie premieres, product launches, as well as through the company’s website, public relations, direct marketing, co-marketing programs, and social media. In addition, the company holds the naming rights to the Dolby Theatre, home to the Academy Awards in Hollywood, California, where the company showcases its technology and host high-profile events. The company also holds the naming rights to Dolby Live at the Park MGM in Las Vegas, Nevada. Dolby Live is a fully integrated performance venue offering live concerts in Dolby Atmos.
End Markets
The company generated 93% of its revenues in fiscal 2024 by licensing technology, the company’s brand, and patents, primarily to device manufacturers.
Intellectual Property
As of September 27, 2024, the company had approximately 27,400 issued and effective patents and approximately 5,900 pending patent applications in more than 100 jurisdictions throughout the world, which includes patents and patent applications acquired in connection with the company’s acquisition of GE Licensing and THEO Technologies (‘THEO’). The company’s issued patents expire at various times through December 2047.
The company has approximately 1,500 trademark registrations throughout the world for a variety of wordmarks, logos, and slogans.
Moreover, in certain countries, the company has relatively few or no issued patents. For example, in some African and Central and South American countries, the company has only limited patent protection for the company’s technologies.
History
Dolby Laboratories, Inc. was founded in 1965. The company was incorporated as a New York corporation in 1967. It was reincorporated in California in 1976 and in Delaware in 2004.
