About Dolby Laboratories

Dolby Laboratories, Inc. (Dolby) creates audio and imaging technologies that transform entertainment for content playback in movies, TV, music, gaming and user-generated content. Analog and digital signal processing and digital compression technologies led to the development of the company's noise-reduction systems for analog tape recordings, and have since evolved into multiple offerings that enable more immersive sound for cinema, DTV (Digital Television) transmissions and devices, mobile devices, OTT (Over-The-Top) video and music services, home entertainment devices, and automobiles. The company derives the majority of its revenue from licensing its audio technologies. It also derives revenue from licensing its consumer imaging technologies, as well as audio and imaging technologies for premium cinema offerings in collaboration with exhibitors. In addition to its licensing business, the company provides products and services for a variety of applications in the cinema and broadcast markets, and offers solutions to companies building real-time digital experiences that increase audience engagement. The company generates revenue from licensing arrangements with approximately 500 electronics product OEM (original equipment manufacturer) and software developer licensees. Strategy The key elements of the company's strategy include advancing the science of sight and sound; providing creative solutions; delivering superior experiences; and expanding the reach of its technologies. Licensing The company licenses its technologies to a range of customers who incorporate them into their products for enhanced audio and imaging functionality for content playback in movies, TV, music, and gaming. As it relates to AAC (Advanced Audio Coding), HE-AAC (High Efficiency Advanced Audio Coding), Extended HE-AAC, AVC (Advanced Video Coding), and HEVC (High Efficiency Video Coding), the company jointly participates in patent licensing programs with other patent owners. The company has various licensing models: a two-tier model, an integrated licensing model, a patent licensing model, recoveries, and collaboration arrangements. Two-Tier Licensing Model: Most of the company's consumer entertainment licensing business consists of a two-tier licensing model whereby its decoding technologies, included in reference software and firmware code, are first provided under license to semiconductor manufacturers whom it refers to as 'implementation licensees'. Implementation licensees incorporate the company's technologies in ICs which they sell to OEMs of consumer entertainment products, whom the company refers to as 'system licensees'. System licensees separately obtain licenses from the company that allow them to make and sell end-user products using ICs that incorporate its technologies. Implementation licensees incorporate the company's technologies into their chipsets that, once approved by Dolby, are available for purchase from implementation licensees by OEMs for use in end-user products. Implementation licensees only pay the company a nominal initial fee on contract execution as consideration for the ongoing services that the company provides to assist in their implementation process. Revenue from these initial fees is recognized ratably over the contractual term as a component of licensing revenue. System licensees provide the company with prototypes of products, or self-test results of products that incorporate its technologies. Upon its confirmation that the company's technologies are optimally and consistently incorporated, the system licensee may buy ICs under a license for the same Dolby technology from its network of implementation licensees, and may further sell approved products to retailers, distributors, and consumers. For the use of its technologies, the company's 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 the company collects on a particular product depends on several factors, including the nature of the implementation, the mix of Dolby technologies used, and the volume of products using the company's technologies that are shipped by the system licensee. Integrated Licensing Model: The company also licenses its technologies to software operating system vendors and to certain other OEMs that act as combined implementation and system licensees. These licensees incorporate the company's 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 the company 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 its technologies that are shipped, and is subject to the same quality control evaluation process. Patent Licensing Model: The company licenses its patents directly to manufacturers that use its IP in their products. It also licenses its patents through patent pools which are arrangements between multiple patent owners to jointly offer and license pooled patents to licensees who use the company's IP in their products. By aggregating and offering pooled patents, these arrangements deliver efficiencies that reduce transactional costs for both IP owners and licensees. Patent pools enable product manufacturers to efficiently and transparently secure patent licenses for collaboratively developed technologies. The company offers its patents related to AAC, HE-AAC, Extended HE-AAC, AVC, HEVC, VVC and other standardized technologies through a combination of patent pools and licensing directly to OEMs. Finally, Via Licensing Alliance LLC (Via LA) generates fees for administering patent pools on behalf of third party patent owners. Recoveries: Licensing revenue recognized in any given period may include revenue from licensees and/or settlements with third parties where the use of the company's technology occurred in previous periods. Collaboration Arrangements Dolby Cinema: The company partners with exhibitors to deliver a premium cinema offering with Dolby Vision and Dolby Atmos at new and pre-existing venues. The company receives revenue at Dolby Cinema sites through a share of box office receipts, which is recognized as licensing revenue. Products The company designs and manufactures audio and imaging hardware and software products for the cinema, television, broadcast, and entertainment industries. Distributed in approximately 90 countries, these products are used in content creation, distribution, and playback to enhance image and sound quality, and improve transmission and playback. Additionally, some of the company's Dolby Cinema arrangements are classified as sales-type leases, and as a result are included in products sales. Services The company offers solutions to companies building real-time digital experiences that increase audience engagement. Over time, the company expects to significantly expand the amount and types of content that can be enhanced through its technologies and capabilities. In addition, the company offers 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. The company also provides PCS for products sold and equipment installed at Dolby Cinema theaters operated by exhibitor partners and support the implementation of its technologies into products manufactured by its licensees. Intellectual Property As of September 29, 2023, the company had approximately 19,300 issued patents and approximately 1,900 pending patent applications in more than 100 jurisdictions throughout the world. The company's issued patents expire at various times through September 2045. The company has approximately 1,600 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 its technologies. Sales and Marketing The company sells its solutions primarily using an internal sales organization to various customers in the markets where it 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 promotes its solutions and its brand through industry events, such as trade-shows, film festivals, movie premieres, product launches, as well as through its 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 it 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. The company maintains more than 20 sales offices in key regions around the globe. Customers The company licenses its technologies to a broad set of customers that operate in a wide range of industries, and it sells its professional products either directly to the end user or, more commonly, through dealers and distributors. Users of the company's professional products and services include film studios, content creators, post-production facilities, cinema operators, broadcasters, and video game designers. 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.