Dolby Laboratories has never been good at competing in an open market. The company was founded to sell patented audio noise reduction technology, relying heavily on the strength of its intellectual property. While a much younger USL managed to beat Dolby’s A-Type noise reduction patent back in those early days, the lesson learned by Dolby was to write better patents. The culture in Dolby has always directed attention to the elimination of competition, rather than simply learning to compete through better marketing and the building of better products. Internally, Dolby engineers believe that no one else comes close to their presumed excellence. One Dolby executive, having recently jumped ship to another position in the cinema industry, commented that his eyes have since opened up to how technically behind Dolby really is.
No matter how strong Dolby’s internal beliefs may be, it has not borne fruit in the cinema marketplace. Dolby’s cinema products achieve sales more through the quality of the brand than the quality of the products. In every area of cinema where Dolby markets technology, a better product can be found from another manufacturer.
It’s no surprise, then, that the company has a lot riding on Atmos. If Dolby flubs its fledgling 3-D cinema sound product, it won’t bode well for the company. But Dolby was not the first to market such technology. Iosono successfully developed the object-based sound concept first for cinema, and Imm Sound was first to successfully market end-to-end object-based sound in the cinema market. Flush with cash, the obvious thing to do was to remove the most significant competitor in the market by buying Imm Sound.
Imm Sound was launched in 2010 by technology incubator Barcelona Media, with private funds and a Spanish government-backed loan from Innocash. As of the company’s most recent announcement, it had installed 51 cinema systems in 10 countries. The early multi-national approach was a risky strategy, as a broad and thin installation base can bankrupt a company due to the cost of support. But Imm Sound managed it well, using the breadth of its installation base to score major film productions such as The Impossible, to be released in October this year.
Perhaps the most impressive part of Imm Sound’s success is that it did it without the usual Hollywood-centric approach. Imm Sound’s focus on non-US markets allowed it to build a significant presence in the marketplace while remaining under Hollywood’s radar. By the time the company began conducting demonstrations at the CinemaCon trade show this year, it could already boast an international installation footprint.
There is no question as to who was first to develop 3-D sound technology between Dolby and Imm Sound. Dolby likes to say it was working on Atmos for 9 years, but the truth is that within the past 2 years, Dolby’s director of marketing, Matt Cuson, threw out the x.1 sound systems that Dolby had been working on, and pushed its engineers to move to a fresher concept in sound. Imm Sound reports that it paraded at least 20 Dolby engineers through its demonstrations while Dolby was in development of Atmos. Similarly, Dolby engineers studied Iosono’s approach to cinema sound. Its crash course in cinema sound technology is only matched by Dolby’s young marketing strategy for Atmos. Doug Darrow, Dolby’s SVP of Cinema, joined the company this year, with the charge to bring Atmos to market. Buying Imm Sound is his most visible step to date in that effort.
The strategy of removing competition may satisfy Dolby’s conquer-driven culture, but it may not be the smartest path forward. Competition is not only good for the marketplace, it also helps speed adoption. Last month this publication discussed the potential for cinema audio to return to the awful state it was in during the 90’s. If Dolby continues to pursue a path of buying out its competition, then the industry will be spared at least that one level of inconvenience. But had Imm Sound carried on in the marketplace, and had it pursued an open file format for object-based sound distribution, the world would have been a better place. Without doubt, the wider range of product features and pricing available through competition, and the competitive pressure on film licensing fees, would have been favored by both exhibitors and distributors. Dolby could very well end up owning some 80% of the market, but the marketplace would be bigger.
Dolby chose to buy out its competition, instead of working with competition towards the development of an open distribution platform. Looks like business as usual at Dolby.