Broadcast Vendor M&A: Dolby to Acquire Doremi for $92.5 Million

Posted by Joe Zaller
Feb 24 2014

Dolby Labs has signed a definitive agreement to acquire digital cinema replay server vendor Doremi for $92.5 million in cash plus an additional $20 million in contingent consideration that may be earned over a four-year period.

The addition of the Doremi product line complements Dolby’s existing line-up of digital cinema replay servers.  Dolby was a pioneer in this market, and enjoyed strong success in markets such as North America, where its system was adopted.  According to filings with US securities regulators, Dolby’s cinema product business (which includes more than just digital cinema replay servers) delivered $169.69m of revenue in 2010, but by the end of 2012 had declined 47% to $88.88m.

Doremi has established a strong foothold in emerging markets where the conversion of cinemas to digital projection technology has not been completed. According to company press releases, Doremi claims to have a 70% market share of digital cinema servers in Latin America, and to have shipped 55,000 of its digital cinema replay servers, including 5,000 units between June – December 2013.

Doremi says it was the first company to achieve compliance with the Digital Cinema Initiative (DCI) specification, and that its digital cinema replay products support 4K development and 3D High Frame Rate playback, which eh company says has “been a en a major contributor to the company’s success.”

Interestingly Dolby’s announcement specifically mentions the company’s new Atmos “object-based sound platform.”  Thus it’s likely that in addition to gaining share in developing markets, Dolby is using the Doremi acquisition as a way to expand the base of Atmos-enabled cinemas around the world.  If this strategy succeeds, Dolby can use the leverage of a large theatrical installed base to further enhance its core business of licensing technology for consumer applications.

Dolby has stated previously that Atmos technology, initially designed for the cinema can be brought to home users for TV and listening via headphones.

However, Dolby has competition for the next generation of consumer audio licensing opportunities. DTS and Fraunhofer have both developed “multi-dimensional audio” codecs with speakers enveloping the viewer (placed on the sides, in front, back and on top).

Rival DTS has developed its Ultra High-Definition (UHD) audio system (aka “Neo:X” consisting of 11.1 channels). German based research organization Fraunhofer (developer of the MP3 audio codec) has developed MPEG-H (up to 22.2 channels), which consists of an Extended HE-AAC based audio codec and a 3-D rendering engine, which supports the efficient transmission of “3-D audio signals” and flexible rendering for the playback of 3D audio in a wide variety of listening scenarios.

“Dolby and Doremi Labs have complementary technology expertise and solutions”

“Dolby and Doremi Labs have complementary technology expertise and solutions,” said Kevin Yeaman, President and CEO, Dolby Laboratories. “Together we’ll be able to advance the pace of innovation and create the kind of cinematic experiences that drive movie attendance for our exhibitor partners.”

“For more than 40 years, Dolby has provided innovative technology to the cinema exhibition industry, offering storytellers the tools and technology to express their visions in new ways,” said Camille Rizko, Founder and President, Doremi Labs. “But more importantly, Dolby shares our commitment to working closely with exhibitors to bring amazing experiences to moviegoers.”

According to Dolby, the acquisition is subject to customary closing conditions, including review by US and international regulators. Depending on these conditions, the transaction is anticipated to close by the end of 2014. The impact of the acquisition on fiscal year 2014 revenue and non-GAAP results is not expected to be material.



Related Content:

Press Release: Dolby Signs Agreement to Acquire Doremi Labs



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