Dolby CFO: Smart Wireless Speakers a Growth Opportunity

Sound bars already represent one of several growth areas for Dolby, but down the road the company also sees a potential growth opportunity in the smart wireless speaker product category that includes Amazon’s Echo and other devices using artificial intelligence-powered voice command, according to Dolby CFO Lewis Chew.

Asked Dolby’s plans for that growing device category, he said May 15 at the J.P. Morgan Global Technology, Media and Communications Conference in Boston: “It certainly is a very attractive market and opportunity. Today, I would not say that we have a significant portion of revenues coming from that part of the market. However, it does really make me think out loud how much that market would benefit from some of our technologies.”

He didn’t provide any specific Dolby plans for that part of the market, saying only: “To some degree, we may or may not be working towards that.” Right now, the focus of those speakers is more on “functionality” than audio quality, for the most part anyway. Consumers just seem to “think it’s cool that they can talk to a speaker and it does something,” Chew said.

But he added: “As time goes along, the quality of that sound and the clarity might matter, and that could fit right neatly with our Dolby Voice product” that makes interactive audio “sound much more lifelike.” If the makers of those speakers also try to have them “play media, we can maybe make that sound better, with more surround sound-like attributes or more sound fidelity,” he said.

So, although Dolby hasn’t made many public announcements about support for such speakers, he told attendees: “Down the road, that could be something that proves to be an opportunity for us.” It also helps that Dolby already has relationships with at least some of the makers of such devices, which it could leverage, he noted, telling attendees: “The relationships that we have with some of these big players is very, very important to the Dolby story. We have very strong relationships with a lot of the names you would recognize,” including Amazon.

A large portion of Dolby’s growth over the past decade or so has come from the consumer electronics (CE) category. In that space, “one of the big areas we’ve always been a player in is Blu-ray and DVD players,” he noted. But those optical formats are “dying” as “more and more of the world is moving towards streaming” video, so revenue from those devices has continued to decline for Dolby, he said.

Meanwhile, stereos and audio/video receivers have been pretty “stable” revenue sources for Dolby, he said.

The two CE products that are “growing the most rapidly” for Dolby now are sound bars and digital media adapters (DMAs) including Apple TV boxes, the Google Chromecast stick and Amazon Fire TV devices, he said. Those products are “growth opportunities” for Dolby because they “benefit from having Dolby audio technology embedded in them, so they can process their signals properly,” he noted.

There’s more room for Dolby to gain market share in sound bars and DMAs, according to Chew. “We seem to be gaining momentum in both of those, particularly in sound bars,” which are “still a relatively new phenomenon,” he said. Although Dolby is supported on the largest DMA brands, “I think there is more to go” there also, he told attendees.

Despite a perception that the PC market has been “declining,” in part because of tablets, he went on to say those devices “have a lot of staying power because, in certain environments, they are very much a necessary tool.” PCs now represent only about 12% of Dolby’s licensing revenue, down from more than 30% at one time, he conceded. But it’s recently been “encouraging” that PCs are increasingly incorporating Dolby Atmos sound, while Lenovo’s new ThinkPad X1 line were the first PCs to feature Dolby Vision, he said. Because there are so many PCs that still don’t include Atmos or Vision, “we look at that as being an opportunity,” he pointed out.

The number of interactive games that feature Atmos, meanwhile, is increasing, but “it’s still in the very early days” and only a “very small sliver of games out there have Dolby Atmos in them,” he said. That, therefore, represents another opportunity for growth at Dolby, along with mobile devices, he told the conference.