Asset Management

Dolby saw growing progress for Dolby Atmos, Dolby Vision and Dolby Cinema in its third quarter (ended June 29), according to CEO and president Kevin Yeaman.
“We are seeing continued momentum in both content and devices for Dolby Atmos and Dolby Vision, including momentum in the combined experience” provided by Atmos and Vision, he said July 25 on an earnings call. Dolby shares were up nearly 5% at $67.65 in early afternoon trading July 26.

The company added several new Dolby Cinema partners in Q2 and “expanded our reach to consumers around the world,” he told analysts, adding: “All of this creates opportunities for increased revenue growth and broadens the number of people that will enjoy Dolby experiences.”

Among the most significant wins in the quarter was Apple announcing in June that its Apple TV 4K and iTunes would support Atmos, he noted.

Apple already supported Dolby Vision and iTunes already has more than 300 Vision titles, he pointed out. But Apple TV 4K “now becomes the first” digital media adapter (DMA) “to support both” Atmos and Vision, he said.

Also significant was that, in early July, Microsoft announced it will support Dolby Vision on the Xbox One, becoming the “first gaming console to support both Dolby Vision and Dolby Atmos,” he said.

The first mobile phone with the combined Dolby Atmos and Vision experience was launched by Sharp in Japan and, in late June, NTT Plala started streaming in Atmos and Vision to those phones, he pointed out.

. Along with the progress made in Q3, there are now many over-the-top (OTT) video providers streaming in both Atmos and Vision, including Netflix, Japan’s Rakuten, China’s Tencent and Walmart’s Vudu, and the combined Dolby experience is also now on TVs from six OEMs, including Hisense, LG and TCL, he said.
On its own, Atmos also “continues to gain traction,” he told analysts. As an example, Amazon will stream in Atmos to Fire TV and Fire TV Cube in addition to various other compatible devices, including TV, sound bars and home theater systems, he said.

“Tom Clancy’s Jack Ryan,” an Amazon Prime Original, will be the first title in Atmos and Prime Video, he said, adding: “We also are seeing more and more adoption in live broadcast.” For example, the World Cup was carried in Atmos by broadcasters in countries including Brazil, China and Russia, he said.

Dolby also continued to “make progress in live sport trials and our other new formats,” he noted. In Q3, live Dolby Vision trials were done with the French Open streamed to iOS devices, while that event was also streamed to Huawei and Samsung mobile phones using Atmos and Dolby AC-4, he said. Atmos is now available on a wide variety of devices, including TVs, PCs, smartphones, tablets, audio video receivers and sound bars at a “wide range of prices,” he said, adding Lenovo launched two new PCs in Q3 with the Atmos speaker system.

Alibaba’s streaming video service started using Dolby Vision, so now the top three OTT services in China support Vision, he also told analysts, adding: “We continue to see Dolby Vision being adopted” in mainstream TV models. There are now about 15 Dolby Vision TV partners, with models being sold as low as $350, he said. In addition, the first PCs with Dolby Vision started shipping from Lenovo and more Blu-ray players are “coming to market from partners” including LG, Panasonic and Sony, he said.

Meanwhile, several new Dolby Cinema partners were announced in Q2, helping the company expand its presence in Europe and enter Kuwait, he said. Dolby Cinema is entering the U.K. for the first time as part of a deal with Odeon Cinemas Group, starting with seven locations, he noted. Also, Kinopolis announced it will open the first Dolby Cinema in Germany, while Gaumont Pathe now has nine screens with Dolby Cinema since opening its first Dolby Cinema location in France in October, he said. Kuwait National Cinema will also open its first Dolby Cinema under the Cinescape brand in Kuwait.

There are now about 160 Dolby Cinema screens open, including the 100th location with AMC, while a total of more than 390 Dolby Cinema locations are either open or committed to globally, he said, adding: “The content pipeline for Dolby Cinema continues to grow, with over 180 titles in Dolby Vision and Dolby Atmos announced or released” to date. Dolby continued to “see support from all major studios” for Dolby Cinema and recent releases included Disney’s “Ant-Man and The Wasp” and “The Incredibles 2,” he said.

In another growth area, Dolby Voice, the company started shipping its latest product, Dolby Voice Room, in late Q3 and “we are encouraged by the initial pipeline activity,” he told analysts.

Dolby reported Q3 revenue grew to $317.4 million from $305.7 million a year ago, while profit increased to $83.1 million (78 cents a share) from $76 million (73 cents a share).

Broadcast represented about 33% of total licensing in Q3 and revenue in that business fell 7% from last year, reflecting a “lower volume of set-top boxes” sold, CFO Lewis Chew told analysts.

Mobile devices, meanwhile, accounted for about 23% of total licensing, with revenue growing about 20%, “driven by higher adoption of our technologies into more devices,” Chew said.

PCs represented about 17% of total licensing in the third quarter, with revenue up only “slightly on higher volume, but partially offset by declining” average selling price (ASP) “due to mix,” he said.

Consumer electronics represented about 14% of total licensing, with revenue up about 8%, “driven primarily by higher activity from DMAs,” he said.
Product and services revenue grew to $31.1 million from $27.6 million, with revenue from Cinema products and Dolby Voice both up, he noted.