Dolby Laboratories creates audio and imaging technologies that transform entertainment
and communications at the cinema, at home, at work, and on mobile devices. Founded
in 1965, our strengths stem from expertise in digital signal processing and
compression technologies that have transformed the ability of artists to convey
entertainment experiences to their audiences through recorded media. Such technologies
led to the development of our noise-reduction systems for analog tape recordings,
and have since evolved into multiple offerings that enable more immersive sound
for cinema, digital television transmissions and devices, OTT video services,
DVD and Blu-ray Discs, gaming consoles, and mobile devices. Today, we derive
the majority of our revenue from licensing our audio technologies. We also derive
revenue from licensing our consumer imaging and communication technologies,
as well as audio and imaging technologies for premium cinema offerings in collaboration
with exhibitors. Finally, we provide products and services for a variety of
applications in the cinema, broadcast, and communications markets.
Advancing the Science of Sight and Sound. We apply our understanding of the
human senses, audio, and imaging engineering to develop technologies aimed at
improving how people experience and interact with their entertainment and communications
content.
Providing Creative Solutions. We promote the use of our solutions as creative
tools, and provide our products, services, and technologies to filmmakers, sound
mixers, and other production teams in their creative processes. Our tools help
showcase the quality and impact of their efforts and intent, and this may generate
market demand.
Delivering Superior Experiences. Our technologies and solutions optimize playback
and communications so that users may enjoy sound and sight in Dolby, which provide
a more rich, clear, and immersive experience.
AC & HE-AAC
An advanced digital audio codec solution with higher bandwidth efficiency used
for a wide range of media applications such as TVs, STBs, PCs, gaming consoles,
mobile devices, and digital radio.
AVC
A digital video codec with high bandwidth efficiency used in a wide range of
media devices, such as TVs, STBs, PCs, gaming consoles, and mobile devices.
Dolby® AC-4
A next-generation digital audio coding technology that increases transmission
efficiency while delivering new audio experiences to a wide range of playback
devices, including TVs, STBs, PCs, and mobile devices.
Dolby Atmos®
An object-oriented audio technology for home theaters, cinema, device speakers,
and headphones that allows sound to be precisely placed and moved anywhere in
the listening environment including the overhead dimension. Dolby Atmos is an
immersive experience that can be provided via multiple Dolby audio coding technologies.
Dolby Digital®
A digital audio coding technology that provides multichannel sound to applications
such as DVD players, TVs, and STBs.
Dolby Digital Plus™
An advanced digital audio coding technology that offers more efficient audio
transmission for a wide range of media applications such as TVs, STBs, Blu-ray
Discs, PCs, and mobile devices.
Dolby® TrueHD
A digital audio coding technology providing lossless encoding for premium quality
media applications such as Blu-ray Discs and home theaters.
Dolby Vision™
An imaging technology combining HDR, an expanded color spectrum, and dynamic
metadata to deliver higher contrast, brighter highlights, and improved details
for TV, cinema, and other consumer devices.
Dolby Voice®
An audio conferencing technology with superior spatial perception, voice clarity,
and background noise reduction that emulates the in-person meeting experience.
HEVC
A next-generation digital video codec with high bandwidth efficiency to support
ultra-high definition experiences for a wide range of media devices.
Two-Tier Licensing Model. Most of our consumer entertainment licensing business
consists of a two-tier licensing model whereby our decoding technologies, included
in reference software and firmware code, are first provided under license to
semiconductor manufacturers whom we refer to as “implementation licensees.”
Implementation licensees incorporate our technologies in ICs which they sell
to OEMs of consumer entertainment products, whom we refer to as “system
licensees.” System licensees separately obtain licenses from us that allow
them to make and sell end-user products using ICs that incorporate our technologies.
Implementation licensees pay us a one-time, up-front fee per license. In exchange,
the licensee receives a licensing package which includes information that is
useful in implementing our technologies into their chipsets. Once implemented,
the licensee sends us a sample chipset for quality control evaluation, and following
our validation of the design, the licensee is permitted to sell the chipset
for use solely to our network of system licensees.
System licensees provide us with prototypes of products, or self-test results
of products that incorporate our technologies. Upon our confirmation that our
technologies are optimally and consistently incorporated, the system licensee
may buy ICs under a license for the same Dolby technology from our network of
implementation licensees, and may further sell approved products to retailers,
distributors, and consumers. For the use of our technologies, our system licensees
pay an initial licensing fee as well as royalties, which represent the majority
of the revenue recognized from these arrangements. The amount of royalties we
collect on a particular product depends on several factors including the nature
of the implementations, the mix of Dolby technologies used, and the volume of
products using our technologies that are shipped by the system licensee.
Integrated Licensing Model. We also license our technologies to software operating
system vendors and to certain other OEMs that act as combined implementation
and system licensees. These licensees incorporate our technologies in their
software used on PCs, in mobile applications, or in ICs they manufacture and
incorporate into their products. As with the two-tier licensing model, the combined
implementation and system licensee pays us an initial licensing fee in addition
to royalties as determined by the mix of Dolby technologies used, the nature
of the implementations, and the volume of products using our technologies that
are shipped, and is subject to the same quality control evaluation process.
Patent Licensing Model. We license our patents through patent pools, which
are arrangements between multiple patent owners to jointly offer and license
pooled patents to licensees. We also license our patents directly to manufacturers
that use our IP in their products. Finally, we generate service fees for managing
patent pools on behalf of third party patent owners through our wholly-owned
subsidiary, Via Licensing Corporation. By aggregating and offering pooled IP,
patent pools deliver efficiencies that reduce transactional costs for both IP
owners and licensees. The Via Licensing patent pools enable product manufacturers
to efficiently and transparently secure patent licenses for audio coding, interactive
television, digital radio, and wireless technologies. We offer our AAC, AVC,
HE-AAC, HEVC, and other IP through patent licensing. Currently, most of our
revenue earned from patent licensing relates to the licensing of AAC and HE-AAC
technologies.
Collaboration Arrangements.
Dolby Cinema: We partner with exhibitors to deliver a premium cinema offering
with Dolby Vision and Dolby Atmos at new and pre-existing venues. We receive
a portion of box-office receipts from the installed theaters.
Dolby Voice: We enter into arrangements with audio and video conferencing providers
where, in return for licensing our IP and know-how, we earn revenue based on
access to our technology and services as well as on sales of the Dolby Voice
Conference Phone (see "Products" below).
Settlements & Back Payments From Licensees: Licensing revenue recognized
in any given quarter may include back payments and/or settlements with licensees.
Within the Results of Operations section of Item 7 "Management’s
Discussion and Analysis of Financial Condition and Results of Operations,"
settlements and back payments are collectively referred to as "recoveries."
Such recoveries have become a recurring element of our business and are particularly
subject to fluctuation and unpredictability.
Products
We design and manufacture audio and imaging products for the cinema, television,
broadcast, and entertainment industries. Distributed in over 80 countries, these
products are used in content creation, distribution, and playback to enhance
image and sound quality, and improve transmission and playback. We also market
and sell the Dolby Conference Phone which optimizes the conference call experience
when using Dolby Voice.
Products revenue is derived primarily from sales of the following:
Cinema
Cinema Imaging Products
Digital Cinema Servers used to load, store, decrypt, decode, watermark, and
playback digital film files for presentation on digital cinema projectors and
software used to encrypt, encode, and package digital media files for distribution.
Cinema Audio Products
Cinema Processors, amplifiers, and loudspeakers used to decode, render, and
optimally playback digital cinema soundtracks including those using Dolby Atmos.
Other
Dolby Conference Phone
An integral hardware component of the Dolby Voice conferencing solution that
enhances productivity through superior sound, full-room voice capture, spatial
voice separation, and touch-screen interface.
Other Products
3-D glasses and kits, broadcast hardware and software used to encode, transmit,
and decode multiple channels of high quality audio for DTV and HDTV distribution,
monitors, and accessibility solutions for hearing and visually impaired consumers.
Services
We provide PCS for products sold and equipment installed at Dolby Cinema theaters
operated by exhibitor partners, and support the implementation of our technologies
into products manufactured by our licensees. We also offer various services
to support theatrical and television production for cinema exhibition, broadcast,
and home entertainment, including equipment training and maintenance, mixing
room alignment, equalization, as well as audio, color, and light image calibration.
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