A DTS Update With DTSí Dan Slusser And Jon Abt

Gary Reber, Widescreen Review: Dan and Jon, I wanted you to give our readers an update on DTS activities in the marketplace. As much of our letters to the editor indicate not everyone understands that you really donít have that much control on the software title releases because youíre really a technology company that licenses technology to content owners to use or not to use, and itís really their choice, not yours, as to what titles will be released on DVD and LaserDisc with DTS Digital Surround soundtracks.Dan Slusser, President, DTS: Half of the world thinks weíre a distributor ñ and a content provider.WSR Reber: The big pent-up frustration is a lot of people would like to support DTS, but Iíve seen colleagues from other magazines just make stupid, irresponsible statements about DTS vs. Dolby performance, or argue over the degree of competition that exists between Dolby and DTS, yet theyíll publish pages and pages arguing the subtlest differences between 94 kHz/24-bit and 192 kHz/24-bit resolution. Itís really important to them.Slusser: To some people it is.WSR Reber: But they wonít recognize similar such differences between Dolby Digital and DTS, and so theyíll just end up following Dolby with ""letís just go with that, that works good"" and bla bla bla. So where is DTS in terms of whatís going on with the software, what opportunities are opening up, are any studios beside Universal Studios Home Video, which I think has done a poor job at supporting DTS, announced support for the format on DVD?John Abt, Executive Vice President, DTS: Well, in general, just by way of background, I think itís worth a couple of comments. I think the DTS penetration into the consumer market has been incredibly rapid and weíve seen tremendous hardware adoption and support, and in many ways the content side of the business has not progressed as fast as we would like, but day in and day out what we see is constantly increasing recognition for the value of DTS technology and its ability to deliver transparent replication of the master. And while consumers come to us constantly and say, ""Why donít you have more content?"" as you well point out, itís not our content. But what weíre going though is weíre lobbying day in and day out and we believe weíre making progress. Itís progress that isnít necessarily as fast as the public wants, but in the longer term we believe there will be large amounts of DVD content. We believe there will be plenty of music content and areas that weíre moving into beyond the mainline A/V space. Weíve got three manufacturers that have car systems, and weíre in discussion with about five others, some very major names that we think will have car systems available sooner rather than later. Weíve also got a fair amount of things in the hopper with respect to making a transition into the PC space which we think very soon you will see announcements about that, and then ultimately in the gaming space. So, the idea is that the advantages that DTS brings to what is currently a fairly narrow home A/V space, I think youíll begin to see them across the board in not only different types of hardware, but youíll begin to see more compelling types of content. The natural, the basic fact is, it takes time to develop the momentum to convince the content providers to do this, but I think from artists to producers to people in distribution theyíre beginning to see the value both from a quality perspective, but also from a branding perspective. The DTS brand has got a tremendous amount of support and they realize that there is this pent-up demand which theyíre trying to meet, which are people saying please, please, please give me the product. One big, huge change from a content perspective, which is significant, is we have decided to license our encoding technology to third party providers. There was an announcement from Sonic Solutions two weeks ago at AES Munich. Theyíre going to have a DTS capable plug-in by fall and we expect by year-end that there will be more players in that space. Essentially itís going to open up the DTS technology to studios and content-providers around the world. So, no longer will they have to say, ""Iíve got to come to DTS,"" or for those who have criticized us to say, you know, ""Youíre doing something, black magic, behind the curtain,"" which in fact, weíre not doing anything, just encoding the material. We can now say, ""Go buy an encoder, play with it yourself, we are confident that the result you will get is equivalent to the master,"" and I think that is going to go a long way to improve the amount of content thatís available.Slusser: Weíre currently in the process, Gary, of making encoders available to a number of people we have a high regard for in this area, which will put this whole question to rest and bring to the public and to the industry a realization that DTS truly is transparent. What you get in a master and what you hear in a master is what you get in the end product. The nonsense weíve been subjected to in recent years by some of our competitors and others who get into this whole game of black magic manipulation, will all be put behind us. Once those encoders are out there whether or not DTS is truly transparent becomes a non-issue. You asked about earlier, your request regarding content, DreamWorks will be putting out product here in the very term, in fact theyíre working on a press release right now.Gary Reber: Yes, I already leak that on our Web site.Slusser: We are in discussions with two other major content suppliers. We hope, that will be public very shortly. Weíre very encouraged by the discussions. I think as the quality issue becomes clear and as the content-providers realize that quality is an issue that they need to deal with, that there is a differentiation. I think that this will follow the same pattern that the motion picture business followed, itíll be just one fell swoop and it will be behind us.WSR Reber: That would be great. On the content side, one of the other obstacles has been the time delay between a Dolby Digital release and then three months later a DTS release of the same movie and without supplements that appeared on the initial Dolby Digital version, and the price tag is $5 to $10 more than the Dolby Digital version which had all the supplements on it. These are really frustrating issues for consumers.Apt: But they fall in the category of, again, content provider decisions, and we do not make those decisions. We do not make decisions about what goes on a disc, or how itís priced. We simply can give the best advice we have to the studios and let them make their decisions, and I will tell you different content providers have different attitudes. But what has uniformly been the case is early on there was some questions as to the size and demand of the market for this content and without question anybody who has released a DTS DVD has shipped more units, far more units, than they expected, and what it has done is it has clicked in their mind that the strategy of later to the game with less features or a higher price point is maybe not the best one. That thereís maybe a way to maximize the release like Image Entertainment has done with ""Hell Freezes Over,"" for example, the concert disc, by doing it all at the same time. We think thatís where the trend is going to be, but again, itís not our decision to make.WSR Reber: It has been surprising to me that Universal Studios, which I have understood from the get-go, had an ownership position in the DTS partnership, would carry on that kind of strategy. I thought the studio powers exercised really poor judgement.Slusser: Well, people make decisions for different reasons. Although no one has told me this, Iím relatively certain that their initial decisions were based on an attempt at incremental revenue. I believe that concept is behind us. Weíve had a number of meetings with Universal and with others relevant to today, and the releases relevant to extras, relevant to directorís comments, outtakes and all the various other things that you want to see on a premier disc, I believe weíre making progress in that area. I think you will see a lot of what has been that type of initial problem go away.Apt: Thereís no reason, despite the competitive claims, that the supplementals canít be put on the disc. Thereís no reason in most cases that they canít put everything on there, itís just, again, a business decision that they make.WSR Reber: Well, with DVD-9 single-side, dual-layer format becoming more and more of the standard releaseÖSlusser: Pretty much, yeah.WSR Reber: That will certainly provide sufficient data capacity.Slusser: Oh, yeah.WSR Reber: ÖAnd what about the possibility of a dual DTS/Dolby Digital soundtrack?Slusser: There are some people experimenting with that right now, and that could become a reality. Again, I think some of the decisions make earlier were really based onÖthey were business judgements based on incremental revenue opportunities, i.e. the pricing, timeliness, and everything that goes with it. WSR Reber: So in other words, letís get them to buy this one, and then weíll get them to buy the next one, as well, just like the movie marketing philosophy, weíll give you a movie only, but then three months later, or six months later, weíll come out with a special edition with 14 other items on it that, you knowÖ.Apt: The content providers know the video business far better than we do, theyíve made it clear, thatís their business. All weíre trying to do is to make them aware of the advantages of what we bring to the table and I think theyíre beginning to recognize them not only from an artistic and a quality perspective, but theyíre starting to recognize them from an economic perspective. And that is a key change, which can only come after youíve, seen some tests run. These guys are not in the business, generally speaking, of making huge bets on things which arenít proven, but what theyíre seeing is big growth in the installation based on the hardware perspective. Theyíve put out these discs and theyíve done extremely well, and so what theyíre saying is, ""Ah, you know, what DTS has said to be the case is largely true, or totally true."" Weíve said the same things from day one, and theyíre now going to begin to tap it and I think itís good for people who want DTS content. Slusser: Our projection is that we will have an installed based of about 1.2 million DTS capable DVD-Video players with DTS Digital Out by year-end, which is a long way from where we came.WSR Reber: Well thatís excellent considering that the total installed base in homes is now estimated to be about 2.5 million.Apt: Exactly. Two years ago, you know, Gary, we had 5,000 decoders on the marketplace, so the numbers are growing at a rapid pace.Slusser: An extremely rapid pace.Apt: One of the other areas we are looking at in addition to the things that I mentioned, is we had an announcement go out last week with an outfit called InterTrust for on-line music distribution, as part of the Secure Digital Music Initiative, SDMI Group. That is another place where we think DTSí fidelity advantages and scalability advantages will be very helpful. We are working with this digital rights management company, with Universal and PolyGram, to provide a solution to the SDMI Group to deliver secure, high-quality music over whatever broadcast medium it may be. And you know, what it really says is that DTS doesnít think about itís business in a narrow sense, itís not just home A/V and itís not just DVD and itís not just music, it is basically everything that your living room becomes, whether itís multichannel 5.1, whether itís 10.2, whether itís your car, or itís a portables market over headphones. Youíll see a company ship a DTS headphone product here shortly.Apt: So, weíre working in all these areas to continue the growth. Itís just, at times, we understand why customers can be frustrated, but our commitment to them is that weíre working day in and day out to provide, or facilitate, the release of content and we think that in the future thatís going to grow.WSR Reber: Well, on the manufacturing side with DVD players and processor/receivers, youíve done tremendous job. Every receiver, every DVD player now supports DTS. I had a meeting with Pioneer Electronics just the other day in Long Beach. They were showing me all their new products. Even their new compact 7-inch widescreen DVD-Video portable player has a DTS built-in decoder. The manufacturing side is all going this way, thatís why itís so surprising to me that the content providers are so lagging in support.Slusser: Content will be right behind it, Gary. Itís going to be, itís just a matter of time. Believe me, Iím not telling you that as anything other than the fact that I donít want to mention studios, because the last time we had that conversation someone got quite disturbed.WSR Reber: What would you say to the frustrated consumer who has invested in a DVD-Video player that is DTS capable, has invested in electronics capable of decoding DTS, and then theyíre looking out there for their software and all theyíre seeing is Dolby Digital everything, and waiting and waiting and waiting for a few DTS titles?Slusser: Itís been my experience that DTS enthusiasts are patient people. I think theyíll be patient a short period of time longer and theyíll see a tremendous about of software in the marketplace. Patience is a virtue.WSR Reber: Thanks Dan and Jon for the update. To your success.For more information, contact Dan Slusser or Jon Abt at 800 959 4109 or visit the DTS Web site at www.dtsonline.com.