Both Dolby and Microsoft bet big on major technology innovations in 2012. The similarities don’t stop there.
In case you’ve been living in a cave, Microsoft hasn’t been doing very well with its latest moves. The company tried to solve several problems with one big sweep, and it appears that it didn’t solve any of them very well. Windows 8 and its Surface tablet are Microsoft’s attempt to catch up to Apple and Google. After the bean counters learned late that Moore’s Law empowers personal electronics to perform as well as a notebook computer, and that users love it, it tried to do what its always done in the past, copy its competition. It copied the Apple Store concept by establishing a few sparsely placed Microsoft stores. Taking a tip from Google, it decided to compete with its own business partners with a me-too product that was more of a bullet to its own foot. You know things have changed when Microsoft, a software company, points to a hinge on a notebook computer as its great innovation. Turning its back on past success, the company is trying to move its developers off of its popular .NET development platform and onto a new Microsoft proprietary platform called WinRT to marry future apps to its new tablet and PC operating system. And to cap the strategy, the redesigned Windows 8 is a complex marriage of both tablet operating system and a PC operating system. Even Apple would suffer dearly from such a radical flurry of changes. Instead of jumping into the personal electronics market at full speed as a great innovator, the net effect of Microsoft’s efforts is that it looks like a tortoise stuck on an island. Neither developers nor users are happy. New versions of Windows typically spur purchases of new computers. But instead, computer sales are down 11% from the previous year.
Dolby has it’s own problems with innovation. It’s been playing tag with cinema for the past decade. It did all but hand the digital server business to Doremi in 2005. By 2009, word was out that Dolby was ready to exit cinema. But in 2012, Dolby got the old religion back, and not only announced a radically new sound system for cinema, but bought the naming rights for Kodak Theatre in Hollywood, now named Dolby Theatre. If you didn’t catch that yet, you most certainly will be reminded over and over again of both events on Oscar night, when the ceremony takes place in – you guessed it – Dolby Theatre.
Unlike Microsoft, which intends to make an ROI out of Windows 8, Dolby is giving away Atmos to build its user base. But Atmos hasn’t excited the sound mixing community, the “developers” of cinema sound, and in particular, hasn’t excited the distributors. Nor has it excited audiences. Five movies have been released with Atmos sound, but no one other than Dolby itself has felt inspired to write about the Dolby Atmos experience in the cinema. Stories abound in Hollywood that Dolby bought its way into each of the 5 releases, which says something about demand by content creators. Having searched and found the one cinema in Los Angeles that played Hobbit in both HFR 3D and Atmos, the only indication that Atmos was used was the ominous presence of speakers over my head, and, of course, the trailer. Having listened to both Atmos and non-Atmos versions of the movie, the non-Atmos version was less distracting from the action on the screen. Not a nice thing to say about a supposed improvement in sound.
Dolby has a bigger problem, though. Its patents for Dolby Digital, a primary source of revenue, are ending. It has Dolby Digital Plus technology, built on patents that have a longer life, but those patents aren’t required in Blu-Ray players. The last card played by successful licensors of technology is the licensing of their brand. Dolby was successful in licensing only its brand when the Dolby noise reduction patents for cassette players ran out. It must do the same for the Blu-Ray market. But it needs to shore up its brand in the marketplace. And what better place to do this than in cinemas.
At core, Microsoft and Dolby suffer from similar ailments. Both have CEO’s that were elevated from CFO positions. Both CEOs were put in place to manage and preserve existing revenue streams, as if those revenue streams would continue without intervention. Neither CEO understands the mesh of technology and the market well enough to provide much needed vision from the top. Both companies suffer from command-and-control top executives, a trait known to stifle innovation. As a result, the big moves made by each of the companies are the product of reaction, not innovation.
Which leads to the last point, that both companies are exercising tired old strategies. Microsoft wants to move developers away from a friendly, open, well-supported software development environment that works on multiple operating systems into a new set of proprietary development tools that only works on Windows. In contrast, the popularity of Google’s Android OS grew rapidly as the code is open source. Similarly, Dolby wants to move studios into proprietary sound mixes based on Atmos, from which all other Dolby versions of the mix, from cinema to consumer, can be rendered. As one industry exec pointed out, Dolby’s strategy is reminiscent of the days when it touted Dolby E compression as the intermediary format of choice for post production, rather than non-proprietary PCM audio. One doesn’t need to do any research to figure out which approach won. Dolby’s executives, no doubt, are busy patting themselves on the back for dreaming up the clever mixing scheme behind Atmos, designed to compromise competitor access to high quality movie mixes, such as DTS. But it’s just a tired, old idea from a company that’s afraid of competing in an open market.
The bets are on that Microsoft will one day abandon Windows 8 and WinRT, and move into something that logically builds on Windows 7 and the .Net platform. Such rumblings are supported by Microsoft CEO Ballmer’s removal in November of the top executive responsible for Windows 8. (It’s no secret that many people would rather see Ballmer replaced.) Similar bets are being made against Dolby’s effort to corner the mix for the movie sound track. Eventually, Dolby will be pressured to compete in an open market. Unlike Microsoft, though, Dolby doesn’t have the luxury of falling back on older technology. While Microsoft can afford to be graceful over failure, Dolby cannot, promising that 2013 will indeed be an interesting year for advancements in cinema sound.