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Competing with Dolby

October 2012 by Michael Karagosian

Successful products come in flavors. Some products sell simply because of quality, reliability, and support. 3-D sells because some filmmakers know how to use it to draw audiences, and it provides exhibitors the means to sell higher priced tickets. Dolby Atmos sells because exhibitors seek “the next big thing.” Dolby once achieved a near monopoly in cinema sound by learning to navigate the chasm that exists between distributors and exhibitors. It is on track to do this again.

There are three elements that are driving success for Atmos. These same three elements could equally drive the failure of its competition.

The first is content. Dolby has the hearts and minds of sound mixers. They acquired Imm Sound’s mixing platform to give them the right tools. And they have decades of experience working alongside mixers to make sure everything works. No sound mixer will hurt their career by recommending Dolby to a director. If a competing system is to make a mark with sound mixers, the system will have to produce sound tracks that work on a variety of sound formats. But they won’t be able to produce a mix for Atmos, because Atmos is propriety.

The second is distribution. Distributors want competitive licensing fees, if there must be licensing fees at all. They also want common distribution formats, so there is less to manage. But as much as they may want these things, they aren’t willing to take the necessary actions to make them happen. Distributors have a strong disposition to not interfere with market forces, and will leave it to those who want to compete with Dolby to fight for themselves. It is a position that is both seductive and deadly to competition. Distributors will cheer on Dolby’s competitors, but the competitors will get little more from them than applause.

The third is exhibition. Exhibitors want content and the ability to monetize their investment in new sound. Monetizing the investment is difficult, even with Dolby Atmos, as it’s unlikely that sound can justify higher ticket prices. So exhibitors will look for big shoulders to stand on. They’ll seek brands with strong marketing to their audience, telling their customers that there’s something special in their cinemas. And they know Dolby can do this. The question by which competitors are compared is whether they can do this. As importantly, long-term thinking will not drive the decision making process. Exhibitors will move down the aisle with Dolby, even when knowing that this will not be a balanced marriage.

With these three strengths on its side, Dolby holds enough cards to win the game. Which also gives Dolby the ability to make life even more difficult for its competition. Although Dolby has stated publicly that Atmos will work with other servers, what they don’t talk about is the licensing fees they plan to burden their competition with. By keeping their system proprietary, by knowing how to navigate in an environment in which distributors will standby and watch and exhibitors will close their eyes, Dolby is well on its way to building a new monopoly in exhibition technology.

Filed Under: Servers and IMBs, Sound Tagged With: Dolby Atmos

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