Don't look now, but Dolby Laboratories' (NYSE:DLB) effort to change the way you view movies is gaining momentum in a big way. Specifically, Dolby Vision just received two huge votes of confidence from AMC Entertainment (NYSE:AMC) and Disney (NYSE:DIS).
Let's cover the AMC deal first.
A new premium theater...
A few days ago, Dolby and AMC unveiled a new premium cinema offering appropriately dubbed "Dolby Cinema at AMC Prime."
AMC plans to complete full installations of Dolby Cinema at AMC Prime in up to four AMC locations in major U.S. cities by the middle of next month. That number will expand to 50 by the end of 2018, then up to 100 Dolby Cinema at AMC Prime theaters by the end of 2024. According to Dolby's press release, Dolby Cinema at AMC Prime promises to make "every visit a completely captivating event [through] spectacular image and sound technologies with inspired design and amazing comfort."
Dolby Cinema at AMC Prime will feature luxuries such as power reclining seats, each of which have unobstructed line of sight and seat transducers that vibrate with the movie. Moviegoers will also enjoy cutting-edge Dolby Atmos audio systems, which are capable of creating sound from every direction from up to 64 independent speaker outputs. Those speakers can take into account up to 128 simultaneous independent audio objects.
But perhaps most encouraging for Dolby is that the new theaters will also feature laser projectors with its new Dolby Vision technology. In short, Dolby Vision focuses on improving not just resolution, but rather the pixels to support larger luminance ranges and greater color volume. The end result, Dolby says, is images that are closer than ever to what viewers see with their own eyes in the real world.
Of course, even 100 theaters by 2024 might not sound like much. But such ventures are crucial for Dolby to effectively pitch its latest technologies to the general public with mainstream adoption in mind.
...and content to fill it
Next, on Wednesday morning Dolby revealed The Walt Disney Studios will bring the first Dolby Vision titles to be shown at Dolby Cinema locations around the globe. To start, that will include Disney's Tomorrowland, in theaters May 22, 2015, as well as Disney Pixar's Inside Out, in theaters June 19, 2015. In addition, Disney plans for next year's live-action rendition of The Jungle Book to be presented in Dolby Vision.
Of course, that's not to say Dolby Vision hasn't made other progress in recent months. At the 2015 Consumer Electronics Show in January, for example, Netflix announced plans to begin streaming Dolby Vision content later this fall. Shortly before that, Warner Bros. Home Entertainment promised to "deliver a steady pipeline of Dolby Vision" movie titles optimized for the upcoming slate of Dolby Vision-enabled televisions to be released this year.
Until now, however, Dolby Vision had yet to reveal any large partnerships to demonstrate its promise on the big screen. And though these new partnerships with AMC Entertainment and Disney will take time to unfold, both will allow Dolby to boast of a more complete picture for Dolby Vision's penetration into the world's entertainment ecosystem. The long-term nature of the partnerships also appear to be a solid vote of confidence for the Dolby Vision platform, and could mean decades of increasing royalties as other entertainment industry partners follow suit.
Diversification is key
Finally, this is also great for Dolby investors in that it helps Dolby diversify revenue streams away from its core audio business. Last quarter, Broadcast segment sales alone generated nearly $89 million in revenue, up 21% year over year and good for 41% of Dolby's total licensing fees. But that growth was largely offset by revenue from PC and Consumer Electronics -- think Blu-Ray and DVD devices -- which dropped 12% and 21% over the same period to collectively comprise 31% of Dolby's total licensing.
Meanwhile, Dolby's "Other" segment -- which encompasses younger technologies including Dolby Vision -- accounted for just 12% of total licensing after rising 40% year over year. In the end, and at the very least, Dolby Vision's involvement with Disney and AMC Prime should serve to help sustain that growth and continue to offset sluggishness in other markets.