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Item 1. Business

2024-11-19 compared with 2023-11-17 · 188 added, 155 removed, 82 unchanged (81% of the section changed)

Dolby Laboratories creates audio and imaging technologies that transform entertainment for content playback in movies, TV, music, gaming and user-generated content.

Founded in 1965, our strengths stem from expertise in analog and digital signal processing and digital compression technologies that have transformed the ability of artists to convey entertainment experiences to their audiences through recorded media.

Such technologies led to the development of our noise-reduction systems for analog tape recordings, and have since evolved into multiple offerings that enable more immersive sound for cinema, DTV transmissions and devices, mobile devices, OTT video and music services, home entertainment devices, and automobiles.

Today, we derive the majority of our revenue from licensing our audio technologies.

We also derive revenue from licensing our consumer imaging technologies, as well as audio and imaging technologies for premium cinema offerings in collaboration with exhibitors.

In addition to our licensing business, we provide products and services for a variety of applications in the cinema and broadcast markets, and offer solutions to companies building real-time digital experiences that increase audience engagement.

Founded in 1965, Dolby Laboratories is in the business of improving the entertainment experience by inventing and innovating technology that advances audio and video.

We enable highly compelling experiences in movies and TV shows, music, sports and more by meeting the needs of content creators, distributors and consumer electronics manufacturers.

We have been at the forefront of multiple audio and video revolutions over the last sixty years including the transitions from mono to stereo then surround, analog to digital, and terrestrial broadcasting to streaming.

Our strength and durability stem from our ability to combine our expertise in signal processing with our close relationships with artists and other industry experts to continually bring to the creative community technology that allows them to express themselves in new and compelling ways.

Dolby is synonymous with high quality entertainment from a consumer perspective and has become critical to makers of consumer electronic devices as our technology is an important component of the creation and delivery of audio and video content.

While some of our technology represents relatively elemental functions like audio signal compression that enable playback, we also offer technology that is innovating in emerging categories including spatial audio and high contrast video.

We derive the majority of our revenue from licensing audio and video technology to electronics manufacturers, and a lesser portion of our revenue by offering premium audio and video technologies to cinema exhibitors.

Key elements of our strategy include:

Advancing the Science of Sight and Sound.

We apply our understanding of the human senses, audio, and imaging engineering to develop technologies aimed at improving how people experience and interact with their entertainment content.

Providing Creative Solutions.

We promote the use of our solutions as creative tools, and provide our products, services, and technologies to filmmakers, musical artists, sound mixers, and other content creators and providers.

Our tools help showcase the quality and impact of their efforts and intent, which in turn may generate market demand.

Delivering Superior Experiences.

Our technologies and solutions optimize playback so that users may enjoy richer, clearer, and more immersive sound and sight experiences.

We apply our understanding of the human senses, audio, and imaging engineering by collaborating with music, TV and movie creators, and innovating in emerging categories like user-generated content, sports and podcasts, to develop and update technologies aimed at enabling and improving how people experience and interact with entertainment content.

Delivering Superior Creative Experiences.

We promote the use of our solutions as creative tools that allow filmmakers, musical artists, sound mixers, and other content creators and providers to fully express their creative intent to their audiences.

Our technologies and solutions significantly improve delivery and playback so that consumers may enjoy richer, clearer, and immersive sound and sight experiences.

Building Ecosystems that Benefit from and Sustain Demand for our Solutions.

We work closely with content creators, content distributors, and device makers to enable them to deliver great experiences to their audiences, creating a virtuous cycle of product development, improved experiences, and sustained demand for our solutions.

We also work closely with technology developers to create and promote standardized technologies that enable content to be enjoyed any place, any time on a broad range of devices.

Expanding the Reach of our Technologies .

We look for new and innovative ways to expand the reach of our technologies to new content, media, devices and audiences.

For example, we are expanding our addressable market to enhance a broader range of content, by offering solutions to companies building real-time digital experiences that increase audience engagement.

Our solution provides the capability to stream high quality audiovisual content in ultra-low latency which reduces the delay between the action and the viewer.

Everyone experiencing the action at the same time enables ways to interact with the content.

REVENUE GENERATION

We look for new and innovative ways to apply our expertise in the science of sight and sound to expand the reach of our technologies to new content, media, devices and audiences.

PRODUCTS AND REVENUE GENERATION

We generate most of our revenue by licensing technology, our brand, and patents to device manufacturers, and selling cinema hardware and services to movie exhibitors.

The following table presents a summary of the composition of our revenue for all periods presented.

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We generate revenue from licensing arrangements with approximately 500 electronics product OEM and software developer licensees.

We license our technologies to a range of customers who incorporate them into their products for enhanced audio and imaging functionality for content playback in movies, TV, music, and gaming.

Our key technologies are summarized in the table below.

As it relates to AAC, HE-AAC, Extended HE-AAC, AVC, and HEVC, we jointly participate in patent licensing programs with other patent owners.

Technology Description

AAC, HE-AAC and Extended HE-AAC Advanced digital audio codec solutions with high bandwidth efficiency used for a wide range of media applications.

AVC A digital video codec with high bandwidth efficiency used in a wide range of media devices.

Dolby AC-4 A next-generation digital audio coding technology that increases transmission efficiency while delivering new audio experiences, including Dolby Atmos, to a wide range of playback devices.

Dolby Atmos An object-oriented audio technology for cinema and a wide range of media devices that allows sound to be precisely placed and moved anywhere in the listening environment including the overhead dimension.

Dolby Atmos provides an immersive experience that can be provided via multiple Dolby audio coding technologies.

DD A digital audio coding technology that provides multichannel sound to a variety of media applications.

An advanced digital audio coding technology that offers more efficient audio transmission for a wide range of media applications and devices.

Dolby TrueHD A digital audio coding technology providing lossless encoding for premium quality media applications.

Dolby Vision An imaging technology combining high dynamic range and dynamic metadata to deliver ultra vivid colors, sharper contrasts, and richer details for cinema and a wide range of media devices.

HEVC A digital video codec with high bandwidth efficiency to support ultra-high definition experiences for a wide range of media devices.

The following table presents the composition of revenue from our licensing business for all periods presented:

The two primary components of our licensing business are Branded Technologies which include Branded Audio Codecs, Dolby Atmos & Dolby Vision, and Patents, which include Audio Patents and Imaging Patents.

We generated over 90% of our revenue in fiscal 2024 by licensing branded technology and patents that enable 1,000 electronic device manufacturers to enhance the audio and visual capabilities of their products by incorporating our technology.

Branded Technology Licensing

Dolby branded technologies enable compelling audio and video experiences for consumers and offer seamless integration and reliability in devices in which they are incorporated.

Dolby branded technologies enjoy widespread adoption, are occasionally mandated as standards, and are frequently considered fundamental to a wide variety of devices and types of entertainment content, including movies, TV shows, sports and music.

Our branded technology solutions are complete solutions.

We provide licensees with software, patent rights, and know how to enable content creation, delivery, and playback.

Our branded offerings are distinguished by a focus on ease of adoption and deployment.

Additionally, our device partners derive value from the use of the Dolby brand, which is synonymous with high quality entertainment.

Dolby branded technologies are part of a unique and broad ecosystem that includes content creators, distributors (such as streaming media companies and broadcasters) and device manufacturers.

Initial ecosystem adoption of these technologies yields a virtuous cycle.

The more content made available using our branded technologies, the higher the likelihood that more devices embed our technology to facilitate the playback of that content.

The more device manufacturers include our technology, the more content creators and distributors want to make content available in Dolby formats.

Branded Audio Codecs

A significant portion of our branded licensing is centered on audio codecs:

compression and decompression technologies for audio.

The most important of these are the following:

DD+ is an advanced surround sound audio codec technology that enables the Dolby audio experience across home theaters, smartphones, operating systems, and browsers.

A versatile, bandwidth efficient and scalable home theater grade audio codec for A/V content, DD+ is designed to deliver up to 7.1 channels of surround sound across multiple platforms and content types.

It is also able to carry channel-based configurations.

• Dolby AC-4.

Dolby AC-4 is an audio codec that uses cutting edge compression to deliver equivalent experiences at half the bitrate of DD+, its predecessor.

Dolby AC-4 matches the delivery method with the optimal configuration, enabling encodes tailored for broadcast or streaming and catering for headphone or speaker playback.

It is also capable of delivering enhanced, user-configurable, and accessible experiences.

The Dolby AC-4 coding system utilizes new aspects of object audio for features like dialogue enhancement or commentator substitution.

Dolby Atmos and Dolby Vision

Dolby Atmos and Dolby Vision are Dolby’s next generation of branded licensing products.

They represent significant innovations, and enable consumers to enjoy increasingly immersive audio and video experiences.

Dolby Atmos and Dolby Vision include encoding technologies that artists use to create more compelling and immersive audio and video experiences, as well as a set of decoding technologies that device manufacturers include on their devices to decode the content the artists have created.

• Dolby Atmos.

Dolby Atmos is the evolution of surround sound technology that creates a three-dimensional audio experience with object-based sound technology with up to 128 audio objects that can be positioned anywhere to allow for precise placement and movement of sound in a three dimensional space.

This is achieved by adding height channels and spatially encoded digital signals.

Dolby Atmos can adapt to varied playback environments and devices, including stereo headphones, speakers, receivers, TVs, soundbars, AVRs and automotive systems.

• Dolby Vision.

Dolby Vision is a visual technology that uses HDR to improve the quality of images in movies, TV shows, sports and games.

Dolby Vision is designed to make images appear more realistic by enhancing details in both dark and bright areas, and by increasing brightness, increasing the range of colors, and depicting deep blacks.

It includes dynamic metadata that adjusts the picture based on a display's capabilities on a per-frame or per-shot basis.

A device must support Dolby Atmos and Dolby Vision to fully experience content in Dolby Atmos and Dolby Vision.

Ecosystems for these products flourish because creatives appreciate that creating content using Dolby Atmos and Dolby Vision tools enables them to express their creativity in unique and compelling ways.

Distributors see value in distributing this differentiated content.

Device manufacturers understand that consumers want to enjoy content in the highest quality possible and will express a preference for devices with Dolby Atmos and Dolby Vision playback.

The amount of content created in Dolby Atmos and Dolby Vision is large and growing.

In addition to strong momentum in music, TV shows and movies, we are also seeing strong global momentum in user-generated content, audio books and live sports.

We believe that this growing body of Dolby Atmos and Dolby Vision content provides device manufacturers with an incentive to license our technology in order to make it available to their customers.

Revenue Generation

We license our branded technologies via a direct sales force that works with approximately 1,000 consumer electronics manufacturers all over the globe.

Licensing usually occurs in two stages.

First, we license to semiconductor manufacturers who incorporate our technologies in ICs that they sell to OEMs of consumer entertainment devices.

These semiconductor licensees pay us a nominal initial fee for use of our technology and the services that we provide in their implementation process.

Second, we license OEMs, who are then authorized to purchase chips from the chip makers, and incorporate those chips into Dolby-approved products.

In addition to the two-stage model, we also license directly to integrated chip and device makers.

Our branded licensing customers typically enter into a per unit royalty arrangement whereby they pay us for each unit they sell.

In accordance with U.S.

GAAP, we estimate the number of units each customer sells every quarter and record it as revenue, and then true up that estimate when we get the actual unit sales data, typically one quarter in arrears.

This method can lead to variability in revenue in any given quarter.

Some of our customers choose to enter into a minimum volume commitment where they commit to a certain minimum number of devices in exchange for a lower price per unit.

If the customer sells more than the number of units they committed to, they pay a set per unit royalty for each incremental unit.

These are annual and sometimes multiyear deals, where the value of the committed volume is generally recognized as revenue up front.

These contract structures, as well as the occasional fixed fee contract whereby a licensee pays for unlimited units, are often selected by large customers and can also lead to variability in quarterly revenues.

From time to time, we also generate revenue via recoveries (“recoveries”), which is revenue attributable to unlicensed or under reported distribution of devices incorporating our technologies in prior periods, usually recovered as a part of a settlement.

Within the Results of Operations section of Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations ," revenue attributable to previous periods' usage including settlements are collectively referred to as "recoveries." Recoveries are a reoccurring element of our business and are subject to fluctuation and unpredictability.

We price our products based on value and volume, among other factors.

With respect to value, the advanced features of Dolby Atmos and Dolby Vision enhance the audio and video capabilities of our CE OEM partners' products and many of those partners can charge a premium for devices that include these technologies.

Branded audio codecs can be implemented standalone but are necessary components for an effective Dolby Atmos implementation.

Generally, the more technologies a customer licenses, the higher the total royalty per device.

Higher volumes generally equate to lower prices.

This dynamic manifests at a market level for device families that represent significant volume.

For example, in 2023, there were over one billion mobile devices, 200 million TVs and 90 million cars sold according to Wards Intelligence, an Auto Research firm.

Accordingly, ARPU for cars is higher than ARPU for TVS, which is higher than ARPU for mobile phones.

Patent Licensing

We generate patent licensing revenue primarily from licensing Dolby-owned patents essential to standardized audio and video technologies.

These technologies are fundamental to the capture, storage, transmission and playback of audio and video, and are embodied in billions of products sold each year throughout the world, including streaming devices, televisions, gaming consoles, automotive media consoles and security cameras.

Technology Standards

The standardized technologies at the core of our patent licenses are generally developed in an open, collaborative process under the auspices of international standard-setting organizations like ETSI, ISO, IEC and/or ITU.

Active participants are leaders in the field, and often include businesses (large and small), research institutes, and universities.

Participants, including Dolby, contribute specialized expertise and/or technology with the goal of creating common industry solutions to address technical challenges.

Given the collaborative and meritocratic nature of the standardization process, the resulting technology solution is both state-of-the-art and designed to meet the requirements of the market, increasing the likelihood of industry adoption.

For audio and video codecs, the standardization process is centered on creating interoperable solutions that work in a uniform manner despite increasingly complex device requirements.

The resulting standardized technologies are intended to connect billions of disparate devices worldwide in a way that allows for seamless communication.

These technology standards have played an essential role in advancing the technology of media capture, storage, transmission and playback through multiple generations of technological development.

For example, the AVC codec helped enable standard-definition streaming over the internet, while the next-generation HEVC codec optimized streaming for higher-definition formats like 4K.

Looking forward, Dolby intends to continue to actively participate (both in standards bodies and independently) in the development of next-generation standardized audio and video technologies, and has begun in particular to explore the use of artificial intelligence in the development and use of audio and video codecs.

Key Current Programs

The majority of revenue from Dolby’s patent licensing comes from licensing standard essential patents associated with standardized AAC, AVC and HEVC codecs, each of which is described below.

• AAC, HE-AAC and Extended HE-AAC.

The AAC family of audio codecs comprises some of the most efficient audio coding technologies available today.

These codecs are designed to provide high quality audio at lower bitrates than prior coding formats.

The AAC family of codecs is widely deployed across most consumer media playback devices.

The AVC digital video codec is highly efficient and is widely implemented in video playback devices including STBs, mobile devices, cameras, and broadcast television services and other products.

AVC is the most widely deployed video codec used by broadcasters and video streaming companies.

HEVC is a next-generation digital video codec that compresses video more efficiently than AVC, leading to an average bitrate reduction of up to 50%.

HEVC enables the distribution of higher-quality video, such as 4K streaming.

HEVC is especially useful for streaming video on mobile devices, where data usage and processing power are often limited.

In addition, we also license patents essential to other audio, video, and communications codec technologies, such as AV1, MPEG H, Opus, and VVC.

These technologies and licensing programs are in earlier phases of technology adoption and licensing program maturity.

Revenue Generation

Given the collaborative nature of the standardization process, Dolby generally owns only a portion of the patent rights in the resulting standard.

As such, patent licensing solutions are not Dolby-branded, and we can directly offer licensees only a portion of the rights necessary to practice the relevant standard.

Our preferred solution to these ownership dynamics is the patent pool.

A patent pool is a collaborative structure administered by a patent pool administrator and comprised of multiple patent owners (referred to as licensors) who agree to jointly license their patents relevant to a particular technology.

There can be dozens of licensors contributing IP to a patent pool for a standardized technology.

By bringing together multiple patent owners to offer a combined solution, pools offer a number of advantages over direct licensing, including the following:

• Pools dramatically decrease transaction costs for most licensees and, to a lesser extent, for most licensors;

• Pools offer licensees relatively simple access to fundamental technology in a simplified ‘one-stop shop,’ enabling licensees to focus their resources on developing their own products and technologies;

• Pools enable widespread, rapid adoption of a technology, which accelerates research into subsequent technologies and catalyzes downstream competition;

• Pools allow licensors like Dolby to focus on innovation rather than sales, marketing, and licensing activities;

• The pool structure naturally leads to more transparent and consistent licensing terms.

Patent pools employ a variety of licensing revenue models, including per-unit and fixed-fee royalties, and sometimes include royalty caps or committed volume commitments in exchange for a lower price per unit.

The fees charged for licensing pooled patents are initially determined by market forces - a careful balance of the need to compensate innovators with the desire to develop an active licensee base.

This balance of licensor and licensee interests is also a core consideration in the development of non-fee licensing terms.

Licensing fees collected from companies implementing the technology are distributed to the licensors by the patent pool administrator after deducting an administration fee.

Royalty share among the pool licensors is determined based on the value of the patents each licensor contributes to the pool, as governed by allocation rules negotiated among the pool licensors.

We operate as licensors in patent pools administered by several patent pool administrators including Access Advance, Sisvel, Via Licensing Alliance LLC ("Via LA") and Vectis.

We are a majority stockholder and licensor in Via LA, which we co-own with Philips and Mitsubishi.

We hold a minority ownership interest in Access Advance.

Patent pool administration fees are paid as a percentage of royalties collected for services rendered by the pool administrator such as royalty collection, allocation and compliance, financial reporting, and tax planning and preparation.

The vast majority of our patent licensing revenue comes from patent pools in the form of royalties, and a minority of our patent licensing revenue is generated from bilateral licensing agreements between Dolby and licensees, with licensing fees negotiated directly with the licensee.

We also generate revenue from Via LA administration fees.

We leverage our universe of creative talent to bring the highest quality experiences to our exhibitor partners.

Dolby Cinemas are Premium Large Format (PLF) cinemas that deliver a Dolby branded premium cinema offering with Dolby Vision, Dolby Atmos, and a proprietary Dolby theater design.

We typically provide Dolby Cinema exhibitors with the requisite Dolby technology at minimal or no upfront cost and generate revenue from these sites through a share of box office receipts, which we recognize as licensing revenue.

Dolby Cinemas deliver a unique, high-end theatre experience, that is different from competing PLFs as well as our exhibitor partner’s other theaters that use Dolby manufactured and distributed cinema hardware, including those that may utilize Dolby Atmos and/or Dolby Vision.

PRODUCTS & SERVICES

We design and manufacture audio, imaging, accessibility, and other hardware and software solutions primarily for the cinema, with occasional applications in the television, broadcast, and live entertainment industries.

Cinema Imaging Products include digital cinema servers used to load, store, decrypt, decode, watermark and playback digital film files for presentation on cinema projectors.

It also includes software used to encrypt, encode, and package digital media files for distribution.

Cinema Audio Products include cinema processors, amplifiers and loudspeakers used to decode, render and optimally play back digital cinema soundtracks, including those using Dolby Atmos.

In addition, we offer various services to support theatrical and television production for cinema, broadcast, and home entertainment, including equipment training and maintenance, mixing room alignment, equalization, as well as audio, color, and light image calibration.

We also provide PCS for products sold and equipment installed at Dolby

Cinema theaters operated by exhibitor partners and support the implementation of our technologies into products manufactured by our licensees.

Revenue Generation

We generate revenue from Dolby Cinema Products by selling and leasing products to exhibitors, excluding Dolby Cinemas, and offering PCS to exhibitors .

Dolby.io is powering the next generation of immersive, interactive, and social experiences with real-time engagement for live events, especially sports.

Dolby.io leverages Dolby’s six decades of experience in the science of sight and sound to deliver 4K video with clarity, depth and detail via our unique content delivery architecture that ensures a high quality, synchronized viewer experience across the globe.

This enables our customers to engage viewers effectively with near real time interaction tools that will strengthen connections and drive participation.

Revenue Generation

Dolby.io represents a departure from our traditional distribution model which is focused on device manufacturers.

Dolby.io is a software as a service (SaaS) product sold directly to enterprises via a consumption revenue model.

SALES AND MARKETING

Our marketing efforts focus on cultivating strong relationships with consumers, creators and our partners in an effort to share how Dolby’s innovations in product and services transform entertainment experiences.

We sell our solutions primarily using an internal sales organization to various customers in the markets where we operate.

We also license our technologies and IP indirectly through patent pools, where owners of IP covering technology standards aggregate their patents and offer the pooled patents to implementers through patent pool licensing administrators who are responsible for the sales and marketing of the pooled patents.

We maintain more than 20 sales offices in key regions around the globe.

We promote our solutions and our brand through industry events such as tradeshows, film festivals, movie premieres, product launches, as well as through our website, public relations, direct marketing, co-marketing programs, and social media.

In addition, we hold the naming rights to the Dolby Theatre, home to the Academy Awards® in Hollywood, California, where we showcase our technology and host high-profile events.

We also hold the naming rights to Dolby Live at the Park MGM in Las Vegas, Nevada.

Dolby Live is a fully integrated performance venue offering live concerts in Dolby Atmos.

We generated 93% of our revenues in fiscal 2024 by licensing technology, our brand, and patents, primarily to device manufacturers.

The following table presents the end market composition of revenue from our licensing business for all periods presented:

Fiscal Year Ended

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PC 12% 10% 13% Windows and macOS operating systems and devices

Other 18% 13% 12% Dolby Cinema, Gaming consoles, Automotive, and Patent pool administrative services

Other 19% 18% 13% Dolby Cinema, Gaming consoles, Automotive, and Patent pool administrative fees

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We have various licensing models:

a two-tier model, an integrated licensing model, a patent licensing model, recoveries, and collaboration arrangements.

Two-Tier Licensing Model .

Most of our consumer entertainment licensing business consists of a two-tier licensing model whereby our decoding technologies, included in reference software and firmware code, are first provided under license to semiconductor manufacturers whom we refer to as "implementation licensees." Implementation licensees incorporate our technologies in ICs which they sell to OEMs of consumer entertainment products, whom we refer to as "system licensees." System licensees separately obtain licenses from us that allow them to make and sell end-user products using ICs that incorporate our technologies.

Implementation licensees incorporate our technologies into their chipsets that, once approved by Dolby, are available for purchase from implementation licensees by OEMs for use in end-user products.

Implementation licensees only pay us a nominal initial fee on contract execution as consideration for the ongoing services that we provide to assist in their implementation process.

Revenue from these initial fees is recognized ratably over the contractual term as a component of licensing revenue.

System licensees provide us with prototypes of products, or self-test results of products that incorporate our technologies.

Upon our confirmation that our technologies are optimally and consistently incorporated, the system licensee may buy ICs under a license for the same Dolby technology from our network of implementation licensees, and may further sell approved products to retailers, distributors, and consumers.

For the use of our technologies, our system licensees pay an initial licensing fee as well as royalties, which represent the majority of the revenue recognized from these arrangements.

The amount of royalties we collect on a particular product depends on several factors including the nature of the implementation, the mix of Dolby technologies used, and the volume of products using our technologies that are shipped by the system licensee.

Integrated Licensing Model .

We also license our technologies to software operating system vendors and to certain other OEMs that act as combined implementation and system licensees.

These licensees incorporate our technologies in their software used on PCs, in mobile applications, or in ICs they manufacture and incorporate into their products.

As with the two-tier licensing model, the combined implementation and system licensee pays us an initial licensing fee in addition to royalties as determined by the mix of Dolby technologies used, the nature of the

implementations, and the volume of products using our technologies that are shipped, and is subject to the same quality control evaluation process.

Patent Licensing Model.

We license our patents directly to manufacturers that use our IP in their products.

We also license our patents through patent pools which are arrangements between multiple patent owners to jointly offer and license pooled patents to licensees who use our IP in their products.

By aggregating and offering pooled patents, these arrangements deliver efficiencies that reduce transactional costs for both IP owners and licensees.

Patent pools enable product manufacturers to efficiently and transparently secure patent licenses for collaboratively developed technologies.

We offer our patents related to AAC, HE-AAC, Extended HE-AAC, AVC, HEVC, VVC and other standardized technologies through a combination of patent pools and licensing directly to OEMs.

Finally, Via LA (as defined below) generates fees for administering patent pools on behalf of third party patent owners.

See Note 15 " Business Combinations " to our consolidated financial statements for a description of the recent business combination involving Via LA.

Licensing revenue recognized in any given period may include revenue from licensees and/or settlements with third parties where the use of our technology occurred in previous periods.

Within the Results of Operations section of Part II, Item 7 " Management's Discussion and Analysis of Financial Condition and Results of Operations, " revenue attributable to previous periods' usage including settlements are collectively referred to as "recoveries." Such recoveries have become a recurring element of our business and are particularly subject to fluctuation and unpredictability.

Collaboration Arrangements

Dolby Cinema:

We partner with exhibitors to deliver a premium cinema offering with Dolby Vision and Dolby Atmos at new and pre-existing venues.

We receive revenue at Dolby Cinema sites through a share of box office receipts, which is recognized as licensing revenue.

We design and manufacture audio and imaging hardware and software products for the cinema, television, broadcast, and entertainment industries.

Distributed in approximately 90 countries, these products are used in content creation, distribution, and playback to enhance image and sound quality, and improve transmission and playback.

Additionally, some of our Dolby Cinema arrangements are classified as sales-type leases, and as a result are included in products sales.

Key products from which we generate products revenue are summarized in the table below:

Product Description

Cinema Cinema Imaging Products Digital Cinema Servers used to load, store, decrypt, decode, watermark, and playback digital film files for presentation on digital cinema projectors and software used to encrypt, encode, and package digital media files for distribution

Cinema Audio Products Cinema Processors, amplifiers, and loudspeakers used to decode, render, and optimally play back digital cinema soundtracks, including those using Dolby Atmos

Other Other Products 3-D glasses and kits, broadcast hardware and software used to encode, transmit, and decode multiple channels of high-quality audio for DTV and HDTV distribution, monitors, and accessibility solutions for hearing and visually impaired consumers

We offer solutions to companies building real-time digital experiences that increase audience engagement.

Over time, we expect to significantly expand the amount and types of content that can be enhanced through our technologies and capabilities.

In addition, we offer various services to support theatrical and television production for cinema exhibition, broadcast, and home entertainment, including equipment training and maintenance, mixing room alignment, equalization, as well as audio, color, and light image calibration.

We also provide PCS for products sold and equipment installed at Dolby Cinema theaters operated by exhibitor partners and support the implementation of our technologies into products manufactured by our licensees.

INTELLECTUAL PROPERTY

We have a substantial base of IP assets, including patents, trademarks, copyrights, and trade secrets developed based on our technical expertise.

As of September 29, 2023, we had approximately 19,300 issued patents and approximately 1,900 pending patent applications in more than 100 jurisdictions throughout the world.

Our currently issued patents expire at various times through September 2045.

Our base of IP assets includes patents, trademarks, copyrights, and trade secrets developed based on our technical expertise.

As of September 27, 2024, we had approximately 27,400 issued and effective patents and approximately 5,900

pending patent applications in more than 100 jurisdictions throughout the world, which includes patents and patent applications acquired in connection with our acquisition of GE Licensing (as defined below) and THEO Technologies ("THEO"), described in more detail in Note 15 " Business Combinations " to our consolidated financial statements.

Our currently issued patents expire at various times through December 2047.

Some of our patents relating to DD technologies have expired, and others will expire over the next several years.

While in the past we derived a significant portion of our licensing revenue from our DD technologies, this is no longer the case as revenue attributed to DD technologies has declined and is expected to continue to decline.

The primary products where DD is widely used include automotive, TVs, and soundbars.

The primary end products where DD is widely used include automobiles, TVs, and soundbars.

We have transitioned a number of our DD licensees to DD+ technologies, an extension of our DD technologies, whose patents generally expire later than the DD patents.

We pursue a general practice of filing patent applications for our technologies in the United States ("U.S.") and foreign countries where our customers manufacture, distribute, or sell licensed products.

We pursue a general practice of filing patent applications for our technologies in the United States and foreign countries where our customers manufacture, distribute, or sell licensed products.

We actively pursue new applications to expand our patent portfolio to address new technological innovations, and we also make strategic acquisitions of technology and patents from time to time.

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From time to time, OEMs have failed to report or have underreported shipments of their products that incorporate our technologies.

We have also had problems with implementation licensees selling ICs with our technologies to third parties that are not system licensees.

We have experienced implementation licensees selling ICs with our technologies to third parties that are not system licensees.

We anticipate that such problems will continue to occur.

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Further, because of the limitations of the legal systems in many countries, the effectiveness of patents obtained or that may in the future be obtained is uncertain.

INDUSTRY STANDARDS

Several Dolby technologies have been adopted as, or are included in, the explicit or de facto industry standard for broadcast, discrete media, and online delivery in various markets worldwide.

Explicit industry standards are adopted through a standardization process whereby government entities, industry standards-setting bodies, trade associations, and others evaluate and then prescribe the use of a technology.

For example, as global broadcast standards for digital, HD, and UHD television have developed, Dolby audio technologies have been adopted or mandated in various regions of the world, highlights of which are as follows:

• DD+ and HE-AAC are mandated for use in terrestrial broadcast across many countries including France, Italy, the United Kingdom ("U.K."), Sweden, Germany, Poland, Turkey, and Russia.

In addition, DD+ and HE-AAC are included in the digital terrestrial television specifications of emerging digital TV markets in Africa, Brazil, South-East Asia, and India while operators in China have selected DD and DD+ as optional technologies for transmissions using the country’s digital terrestrial television specification.

• DD is mandated for HD broadcast in multiple regions including North America and South Korea, and for DVD players on a global basis.

• AC-4 is Dolby’s audio coding technology that has been adopted for implementation for next generation broadcast services in certain regions by worldwide standards organizations including the DVB and ATSC.

In Europe, AC-4 has been mandated in next generation broadcast specifications for Denmark, Finland, Iceland, Ireland, Italy, Norway, Poland and Sweden, and is also included in the specification for the new UHD terrestrial TV platform issued by regulator ARCOM in France.

In North America, AC-4 is mandated for TVs for the NextGen TV over-the-air broadcast platform, based on ATSC3.0.

The adoption of AC-4

continues to grow, and AC-4 is already widely supported in UHDTVs available worldwide from major manufacturers.

• In mobile devices, HE-AAC v2 (3GPP eAAC +) is specified for various applications in the 3rd Generation Partnership Project suite of standards.

• Extended HE-AAC is included in Digital Radio Mondiale radio broadcasting standards.

In addition, Dolby technologies have become, or are included in, de facto industry standards in many consumer entertainment products.

De facto industry standards are adopted by industry participants when technologies are introduced to the marketplace and become widely used, and include the following examples:

• Prior to the adoption of HD terrestrial broadcast standards mandating Dolby technologies, many European HD broadcasters began broadcasting in DD or DD+, leading OEMs to include these technologies in their televisions and STBs for the European market.

• HE-AAC is a de facto audio standard in entertainment services.

It is included in popular operating systems and widely used by major broadcasting, streaming, and radio services.

• DD+ is the de facto technology used by a wide range of pay-TV operators and streaming services worldwide and is included in popular operating systems such as iOS and Windows.

It is also widely used by major OTT services such as Apple TV+, Disney+, Netflix, and Amazon, and is included in the specifications of these services.

• Extended HE-AAC is a de facto industry standard in streaming applications.

It is included in popular operating systems and used in major OTT services.

RESEARCH AND DEVELOPMENT

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and internationally.

Dolby’s history of producing innovative technology has created many forms of IP.

Dolby’s history of innovation has resulted in many forms of IP.

This IP generates licensing revenue that enables us to fund and pursue further innovation.

The majority of our R&D resources are focused on developing leading audio and imaging technologies for consumer entertainment.

Each of these technologies can support many offerings, and we anticipate bringing new innovations to market in the future.

Most of our R&D resources are focused on audio and video technologies for consumer entertainment.

A significant portion of the R&D budget is dedicated to forward looking research because innovation is a core and critical function at Dolby.

The goal of our research teams is to maintain leadership in all our current markets while simultaneously inventing new experiences.

Our researchers work on every stage in the product development cycle because the end markets we serve are constantly evolving to take advantage latest innovations, and keeping our offerings on the cutting edge helps us keep our partnerships strong and productive.

PRODUCT MANUFACTURING

Our product quality is enabled through the use of well-established, and in some cases, highly automated, assembly processes along with rigorous testing of our products.

Our hardware product quality is enabled through the use of well-established, and in some cases, highly automated, assembly processes along with rigorous testing of our products.

We rely primarily upon contract manufacturers for the majority of our production capacity.

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We source components and fabricated parts both domestically and internationally.

SALES AND MARKETING

Our marketing efforts focus on demonstrating how our solutions improve entertainment experiences.

We sell our solutions primarily using an internal sales organization to various customers in the markets where we operate.

We promote our solutions and our brand through industry events such as trade-shows, film festivals, movie premieres, product launches, as well as through our website, public relations, direct marketing, co-marketing programs, and social media.

In addition, we hold the naming rights to the Dolby Theatre, home to the Academy Awards® in Hollywood, California, where we showcase our technology and host high-profile events.

We also hold the naming rights to Dolby Live at the Park MGM in Las Vegas, Nevada.

Dolby Live is a fully integrated performance venue offering live concerts in Dolby Atmos.

We maintain more than 20 sales offices in key regions around the globe.

We license our technologies to a broad set of customers that operate in a wide range of industries, and we sell our professional products either directly to the end user or, more commonly, through dealers and distributors.

our professional products and services include film studios, content creators, post-production facilities, cinema operators, broadcasters, and video game designers.

The entertainment industry are highly competitive, and we face aggressive competition in all areas of our business.

The entertainment industry is highly competitive, and we face aggressive competition in all areas of our business.

Some of our current and future competitors may have significantly greater financial, technical, marketing, and other resources than we do, or may have more experience or advantages in the markets in which they compete.

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By offering an integrated system solution, these potential competitors may also be able to offer competing technologies at lower prices than we can, which could adversely affect our operating results.

Many products that include our audio and imaging technologies also include technologies developed by our competitors.

Many end products that include our audio and video technologies also include technologies developed by our competitors.

We believe that the principal competitive factors in our markets include some or all of the following:

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• Availability of compatible high quality audio and video content;

Certain foreign governments, particularly in China, have advanced arguments under their competition laws that exert downward pressure on royalties for IP, which can impact the licensing fees that we are able to collect.

The regulatory enforcement activities in such jurisdictions can be unpredictable, in some cases because these jurisdictions have only recently implemented competition laws.

Certain foreign governments and industry participants have advanced arguments under competition laws that exert downward pressure on royalties for IP, which can impact the licensing fees that we are able to collect.

The regulatory enforcement activities in such jurisdictions can be unpredictable.

Our technologies, products, and services span the audio and imaging sectors of several distinct and diverse industries, including the broadcast, mobile, consumer entertainment, PC, gaming, automotive, cinema, and other industries.

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We are committed to fostering a workplace environment in which every employee can contribute their fullest potential and make a positive impact through their roles.

Details of this work are available in our Sustainability Report, and we encourage you to read it on our website and learn more.

Details of this work, along with our sustainability, social impact, employee wellbeing, and inclusion and belonging initiatives, are included in our Sustainability Report, and we encourage you to read it on our website to learn more.

Nothing in our Sustainability Report shall be deemed incorporated by reference into this Annual Report on Form 10-K.

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None of our employees are subject to a collective bargaining agreement.

Employee Well-being

Our workforce strategies prioritize employee well-being and take an integrated approach to mental, physical, and financial well-being for our employees.

We have expanded our well-being programs to include therapy and access to wellness coaching, mindfulness training and live community sessions.

We continue to implement business strategies that support the health and safety of our employees and enable business continuity.

We have implemented a flex work program that enables employee connection and effective work delivery globally.

In a company-wide survey in May 2023, Motivation & Commitment scores indicate that we remain highly connected to our work and each other.

Diversity, Inclusion and Belonging ("DIB")

To spark positive change, bolster employee resiliency, and strengthen our community, DIB is embedded across company programs.

Our approach comprises investing in the next generation of talent, cultivating a culture of inclusion, and belonging and advancing and retaining our employees.

To invest in the talent of the future, we provide financial contributions, employee engagement, and support of science, technology, engineering, arts, and mathematics education and partnerships at K-12 schools and universities.

We have programs and practices in place to support creating an environment where individual experiences and perspectives are welcome and where everyone can belong and thrive.

This includes equipping our leaders, colleagues, and peers with tools to have open and authentic conversations.

We look at diversity, inclusion and belonging comprehensively through hiring, retention, progression, and employee experiences.

We empower everyone at Dolby to be co-creators of change by offering employees opportunities to learn and grow through educational sessions, hands-on workshops, and employee-led Employee Network ("EN") events.

Our EN community encompasses 14 networks, convening around many different dimensions of diversity including gender, race/ethnicity and more, to build community and drive awareness of issues impacting employees identifying with these dimensions of diversity and their allies.

We hold ourselves accountable for our progress and publish our global gender diversity and U.S.

race and ethnic diversity workforce data annually.

We encourage you to review our Sustainability Report for more detailed information.

Compensation and Benefits

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In addition to comprehensive health benefits and the ESPP, depending on the location, employees may also enjoy free or subsidized fitness programs, commuter benefits, wellness credits, tuition reimbursement opportunities, and personal development courses, among other benefits.

Social Impact

Through our social impact programs, employees from our offices around the world organize to volunteer as individuals, as part of a work team or through our diversity, inclusion, and belonging employee networks.

From mentoring youth, to supporting adults re-entering the workforce, to aiding people experiencing hardships, our employees are making our communities stronger.

We partner with organizations in our local communities around the world, including the Arts, Media and Entertainment Institute, Bay Area Video Coalition, Girls Make Beats, Girls Who Code, IGNITE Worldwide, Inneract Project, University of Sydney’s Women in Engineering Program, and Fundacja Rodziny Maciejko in Poland to organize employee volunteer opportunities.

Our efforts are intended to share Dolby’s experiences, ideas and approaches from our unique position at the intersection of science, technology and art.

Management Succession Planning

Our Board of Directors works with the Nominating and Governance Committee on succession planning for our Chief Executive Officer, including a process for identifying potential successors.

Our Board of Directors has adopted an emergency succession plan in the event of the death, disability, incapacity or unanticipated departure or leave of our Chief Executive Officer.

The organization regularly conducts talent reviews for other management roles and key positions for succession management and talent planning purposes.

Board Oversight of Human Capital Management

Through our Compensation Committee, our Board of Directors provides oversight of human capital matters.

Our Nominating and Governance Committee works with the Board of Directors on management succession as described above.

The Board and Board committees are supported in these efforts by our management team, People, Legal and Compliance.

Our Nominating and Governance Committee works with the Board of Directors on management succession planning.

Board and Board committees are supported in these efforts by our management team and People, Legal and Compliance teams.

CORPORATE AND AVAILABLE INFORMATION

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Our website is www.dolby.com.

We make available on our website, free of charge, our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendments to those reports, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

We make available on our website our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendments to those reports, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

Our SEC reports can be accessed through the Investor Relations section of our website at www.investor.dolby.com.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business