Dolby Sees Broadcast, E-media, Mobile As Future Growth Engines
As its optical disc and PC businesses continue to decline, Dolby is looking to broadcast, e-media, mobile and emerging voice communications technologies to carry the company forward, CEO Kevin Yeaman said in the company’s fiscal Q4 earnings call Thursday. Yeaman cited the current shift from optical disc technology to digital broadcast and e-media, which he said was reflected in the composition of fiscal 2011 licensing revenue.
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Non-optical-disc-based technology was 52 percent of Dolby revenue in fiscal 2011 compared with 45 percent in 2010, Yeaman said, driven by TVs, set-top boxes, mobile phones and Dolby’s post-processing business. “We continue to see growth opportunities in broadcast and e-media even as the optical disc matures,” Yeaman said. Q4 revenue from CE products was up 1 percent for the year, said Chief Financial Officer Murray Demo, as growth in Blu-ray licensing revenue offset declines in DVD and other CE products. Full-year revenue from the CE market comprised 21 percent of licensing revenue in 2011, compared with 22 percent a year earlier, Demo said.
In the PC segment, Q4 licensing revenue was down 11 percent year over year and five percent sequentially on lower Microsoft ISV business, Demo said. PC licensing accounted for 30 percent of licensing revenue in fiscal 2011 compared with 36 percent in 2010, he said. A 29 percent increase in broadcast revenue year over year was driven by a higher TV attach rate, and for the year, licensing revenues from broadcast were up 4 percent to 31 percent of licensing revenue, he said.
Dolby believes lack of standardization in the e-media business gives it a significant opportunity to create a high-quality reference point for audio in the growing market. Yeaman referred to traditional models in optical disc technology and broadcast where content creators have had “top-down control” over the consumer experience in a “one-to-many” format where devices were built to a uniform standard. Companies would send “one reel, one file or one signal to a fairly uniform playback ecosystem,” resulting in “a fairly consistent quality experience within each platform,” he said. With e-media, the industry is dealing with “one-to-one delivery” where content creators and service providers deliver content to an increasingly “heterogeneous ecosystem of devices, few of which have the same profiles or capabilities,” he said. Dolby hopes that content creators and device makers will want to differentiate product through high-quality audio “consistently across many devices” using Dolby technology that provides the infrastructure “that captures their vision and enables the optimal playback experience wherever and however consumers interact with their content,” he said.
Dolby is working with content creators and service providers on tools and formats for the encoding and delivery of e-media content in “efficient multi-channel sound,” Yeaman said. Dolby technology has been adopted in the digital media space by Amazon, Apple, Netflix, RoxioNow, Vudu and Blockbuster’s CinemaNow platforms, he said, estimating that “tens of thousands” pieces of content have been formatted in Dolby multi-channel audio.
Dolby recently signed a deal with Samsung for handsets and tablets, which will contribute to Dolby’s growth in the mobile market next year, he said. Dolby received royalties for its multi-channel audio format on four percent of smartphone shipments in fiscal 2011 and expects that number to rise to “low to mid teens” in 2012, Yeaman said. The company has its sights on a total available portable connected device market of 1.5 billion units by 2015, he said. According to Ramzi Haidamus, executive vice president-sales and marketing, the company has found that having a multi-channel audio codec is “critical” to solving issues in the mobile market including insufficient volume, unintelligible dialog and over-compressed sound. Dolby Mobile is in more than 140 handsets and more than 30 models with Dolby Digital Plus, he said.
Dolby is looking to leverage its audio expertise in sound capture, signal processing, delivery and playback to improve voice communication for business, Yeaman said. Current audio performance of business communications systems doesn’t support “natural, productive meetings,” he said. Advances have made it possible to deliver audio quality “much better than current voice services,” he said. Dolby is developing next-generation communications and is “working closely with initial potential customers on solutions,” he said.
For Q4 2011, Dolby reported revenue of $244 million, compared to $228 million for Q4 2010, the company said. Net income was $79 million versus $65 million in Q4 2010, it said.