Dolby at JPM notes - 5-12-20
CFO Lewis Chew in a fireside chat format
- Opened with a general discussion of how attractive DA and DV are in streaming. Something I harp on constantly. Dolby is a streaming play and will some day be rewarded as such.
- General discussion of how DA has been prevalent in video(audio within video), but has seen a recent expansion in music. This was highlighted by the Amazon Echo Studio at CES. Music is being mastered in DA, which helps DA become more relevant in handsets across all price points and not just at the high end.
- PC's got a boost from the work from home trend. In the last year or two, DA and DV have proliferated in the PC/laptop market, going beyond basic Dolby Digital. PC is now a growth opp due to proliferation within a stagnant market. PCs are currently in the low teens of total revenue, down from a peak above 30%
- Broadcast is the largest segment at 40-45% of total licensing. TV and set top boxes. They have a very high penetration in audio, about 50%, primarily the legacy digital Dolby offerings. As stated previously, DV is in 10% of the 4K market, which is about 50% of the total TV market. This has grown at 100% per year in the last 2 years and they expect it to grow significantly in 2020 despite Covid-19. They did not re-iterate their forecast of another 100% growth, just said grow significantly.
- Set top boxes have virtually no DV penetration, so adoption represents a growth opp even within a flat to declining set top market. Chew believes live sports in DV is a future opp.
- Discussed HDR10+ threat, standard promoted by Samsung. Lewis believes the creative community is firmly in the DV camp. Streamers and all non-Samsung TVs are moving in the DV direction. He said he hopes there comes a time where Samsung adopts DV, for now it is a co-existence.
- Highlighted the new Apple iPhone SE at the lower price point has adopted DV. The Apple iOS has adopted DA and DV, Samsung Galaxy has adopted DA. The rest of the industry has some penetration, They are hoping for proliferation there.
- DC has 250 screens, more than 1/2 in US. They don't expect any revenue from DC in Q3 and very little equipment revenue. No real insight how these businesses will unfold beyond that.
- Gaming - Surge in gaming demand in this environment. The console space is their primary focus, they want to get DA and DV adopted across the triopoly - Xbox, PS, and the Nintendo series. They are hoping to penetrate this market further in the upcoming upgrade cycle. PC is also used for a lot of gaming. They highlighted Call of Duty, with 50M users just went out. (appears it uses DA and DV)
- Autos - mainly just back seat DVD players currently, hoping push into music with DA will result in DA being adopted in car audio.
- Question about price increases in royalty contracts. Typically their contracts are at stable pricing, new technology is where pricing upgrades can occur.
- Question on anything new coming. Highlighted Dolby io, which allows developers to imbed Dolby technology in their apps. |
