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Dolby Labs Finds its future with Netflix and streaming 4K video

by on January 28, 2015
 

Stephan Jukic – January 28, 2015

After releasing first-quarter earnings that were rather mixed, shares of famed A/V media company Dolby Labs dropped by nearly 11%, causing a new 52-week low that is part of a general market underperformance that’s been running for the last five years.

However, the news hasn’t been entirely bad for Dolby. In this first fiscal quarter, the company has also seen a very small but notable year-over-year sales increase of 1.3%, bringing total sales to $234.2 million. And while analysts were disappointed in their expectations for a growth in sales of 3.4% in the same time frame, adjusted earnings per share surpassed expectations at $0.56 instead of the analyst predicted $0.38.

As for Dolby CEO, Kevin Yeaman, he thinks the results aren’t so bad overall and called the first quarter returns “A solid start to the year driven by the strength of our broadcast business”.

However, looking down the road, Dolby expects to increase its earnings per share and overall sales even further to $0.63 of non-GAAP earnings and $265 million in overall earnings respectively.

In part, they’re basing their expectations on a rapidly changing business model that’s hinging its success on the future of streaming media through services like Netflix and technologies like 4K ultra HD resolution.

The media development technology company has started licensing its audio and video platform technologies to the newest generations of set-top boxes that are becoming so popular in the 4K entertainment world and in doing so are helping deliver the latest in visual media advancements to the web-connected TV sets that we’re seeing arise with the proliferation of smart TVs from every single major manufacturer. A very large percentage of these new TV systems come with the increasingly popular display technology of 4K resolution.

In this field, Dolby is seeing its sales increase enormously by 21% year-over-year and the overall figures for this segment make up some 41% of total Dolby revenue.

On the other hand, PC system licenses and non-networked consumer electronics like home theater systems and Blu-ray players dropped 21% as part of the Dolby revenue pie. Overall, it seems these ageing technologies are losing out to the power of connected and streaming media in which Dolby is participating.

Industry and technology watchers can make some interesting observations and conclusions from these trends: As the home entertainment field moves steadily in the direction of digital streaming and web-connected media, companies like Netflix and others who provide entertainment in the area are major beneficiaries.

Luckily then for Dolby that Netflix is embracing the company’s latest video encoding technology.

Dolby Vision is helping Netflix and others with a similar business model expand their 4K ultra HD media streaming content services by providing them with the latest and best encoding technology that it offers. The hope of Dolby Visio is that it won’t just help improve 4K pixel count but that it will also redefine the color space and video compression quality of the latest 4K UHD content that gets delivered to homes and offices.

Streaming content like Netflix's House of Cards is being delivered in 4K resolution thanks to Dolby Digital technology

Streaming content like Netflix’s House of Cards is being delivered in 4K resolution thanks to Dolby Digital technology

Improvements by Dolby in these areas will only further cement its relationship with the streaming media industry and will at the same time also further improve results in the company’s set-top media box and connected TV division, both of which are playing a large part in streaming ultra-high definition media delivery.

In simple terms, Dolby is betting heavily on the success of the emerging 4K video standard and thus positioning itself into a crucial position in delivering that technology effectively for producers of ultra HD content.

Story by 4k.com

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  • M Britton
    January 29, 2015 at 2:53 am

    We are offered 4K from Netflix, now why not offer a lossless soundtrack also like Dolby TruHD or DTS-HD? Dolby Digital (Plus) is not going to cut it in this new generation who wants to be blown away by video AND audio.

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  • towergrove
    January 30, 2015 at 1:47 pm

    While I like that they are focusing on Netflix they also need to focus on Electronic Sell Thru in the form of Streaming and Download to own category. People like me spend money on purchasing vs rental and that a big chunk of the overall pie in 2015.

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