DLB

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How DLB rewrote its risk factors

10-K ITEM 1A · FY2024 → FY2025

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One such trend has been the shift by consumers in certain markets away from subscription-based cable and satellite television providers toward streaming services, commonly referred to as "cord-cutting." While cable and satellite television often require a STB, consumers can also access streaming media through smart TVs or DMA devices.
As consumers have trended toward canceling subscriptions to these traditional cable and satellite providers in favor of streaming media, we have observed declines in demand for STBs in certain regions.
Further, macroeconomic conditions such as inflation, trade barriers, geopolitical instability, global health risks, and other factors may adversely impact the ability of our partners to manufacture and distribute mobile devices and consumer demand for mobile devices.
For example, beginning with PCs shipping with the 24H2 version of Windows 11, Microsoft changed the way Dolby’s DD and DD+ decoders are provided to third party PC OEMs.
For such devices, Dolby now distributes those codecs directly to PC OEMs instead of through Microsoft’s Windows operating system.
Our revenue and associated demand for Dolby Cinema and cinema products are affected by cinema industry and macroeconomic conditions, which are subject to risks including consumer trends and box office performance in general, delays in cinematic releases, the seasonality of film releases and associated moviegoing attendance, potential tariffs and other trade barriers, and other events or conditions in the cinema industry.
For example, restrictions related to the COVID-19 pandemic and certain entertainment industry labor strikes resulted in reduced cinema attendance and box office receipts in the past.
Such disruptions impacted, and potential similar disruptions in the future could potentially impact, revenue generated by Dolby Cinema theaters and exhibitors’ willingness and ability to invest in Dolby Cinema and cinema products.
Customers Our licensing business depends on the incorporation of our technologies into products and the sales of such products, which are, in large part, not within our control .
Consumer spending weakness may impact our licensees and licensing revenue generally .
Weakness in general economic conditions due to inflation, elevated interest rates, lower consumer confidence, tariffs and non-tariff trade barriers, a potential recession, pandemic or other adverse economic conditions, may suppress consumer demand in our markets and consumers going to the movies.
Technology Standards Certain parts of our business are dependent on the inclusion of our technologies in technology standards, the adoption and development of which are not fully within our control.
The entertainment industry in particular has historically depended upon technology standards to ensure compatibility and interoperability across delivery platforms and a wide variety of consumer entertainment products.
Nonetheless, it can be difficult to have our technologies and products adopted as technology standards.
The market for broadcast technologies in particular has traditionally been heavily based on technology standards, in some cases mandated by governments choosing from among alternative standards.
The importance of broadcast standards in the entertainment technology ecosystem has been gradually diminishing over the recent years.
This trend is reducing the importance of the inclusion of our technology in certain broadcast standards while increasing the importance of inclusion within internet and mobile technology standards.
Even when a standards-setting organization incorporates our technologies in an technology standard for a particular market or geographic region, our technologies may not be the sole technologies adopted for that market.
Our sales estimates may be based on reports or studies from third parties may turn out to be inaccurate or incomplete, and that risk may increase when macroeconomic conditions are highly dynamic, which could result in significant variation in the amount of revenue we recognize in a quarter.
A licensee may disagree with our interpretation of the terms of a license agreement or, as a result of an audit, a licensee could challenge the accuracy of our calculation.
We are regularly involved in discussions with licensees regarding license terms.
Similarly, the success of Dolby Cinema and cinema products is dependent on our ability to partner with movie theater exhibitors to launch new Dolby Cinema locations and screens using our cinema products and to deploy new sites in accordance with plans, and on the continued release and box-office success of new films in the Dolby Vision and Dolby Atmos formats.
However, our patent program faces a number of challenges, including: • Possibility that innovations may not be protectable; • Failure to protect innovations that later turn out to be important; • Insufficient patent protection to prevent third parties from designing around our patent claims; • Our pending patent applications may not be approved; • Possibility that an issued patent may later be found to be invalid or unenforceable; • Patents eventually expire.
As of September 26, 2025, we had approximately 28,400 issued patents in addition to approximately 6,100 pending patent applications in more than 200 jurisdictions throughout the world.
Our currently issued patents expire at various times ranging from 2025 through 2047.
In the case of our patent coverage related to DD and DD+ audio codec technologies, some of our relevant patents have expired and will expire in the coming years, but others will continue to apply.
We have continued to innovate and develop IP to support these standardized technologies and their various implementations, including generating patents associated with different or new features of the technologies and obtaining patents that generally expire later than those incorporated into the original standards.
Our customers use our DD and DD+ implementation for quality, reliability, and performance and to take advantage of other elements of these offerings such as Dolby branding, even in locations where we have not had or no longer have applicable patent coverage.
Nevertheless, revenue attributed to DD and DD+ technologies has declined and is expected to continue to decline due, in part, to expiration of relevant patents.
Many of our partners have adopted newer generations of our offerings such as Dolby AC-4 technologies, the associated patents of which generally expire later than those associated with DD and DD+.
We will continue to work to transition our DD and DD+ licensees to our newer technologies, but the success of such efforts is not guaranteed.
Some of our patents incorporated into the AAC audio coding standard and the AVC digital video coding standard, from which we derive a significant portion of our licensing revenue, have expired and others will expire over the next several years.
While there are alternative versions of these standards that offer different features and that incorporate patents that have later expirations, licensees may see less value in those alternative versions, resulting in a decrease in royalty revenue.
A decrease in royalty revenue may also result in decreased revenue from patent pool administration fees.
Our patents are incorporated into newer coding standards that represent successive generations of technology, such as, in the case of AAC, Extended HE-AAC and, in the case of AVC, HEVC whose patents generally expire later than the AAC and AVC patents and to which many of the AAC and AVC licensees have, are in the process of, or may in the future transition.
However it is not certain that all or most licensees will transition to such newer technologies.
We have often experienced, and expect to continue to experience, problems with non-licensee OEMs and software vendors, particularly in certain emerging economies, incorporating our technologies and trademarks into their products without authorization and without paying licensing fees.
Unauthorized IP use occurs in the context of both branded products and technology offered through open standards.
As emerging economies have transitioned from analog to digital content, such as the transition from analog to digital broadcast, we have observed an increase in problems with this form of piracy.
Changes to the patent and intellectual property laws and regulations in the U.S. and abroad may limit our ability to obtain, license, and enforce our rights.

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Gone since FY2024

One such trend is the shift by consumers in certain markets away from subscription-based cable and satellite television providers toward streaming services, commonly referred to as "cord-cutting." While cable and satellite television often require a STB, today consumers can also access streaming media through smart TVs or DMA devices.
As consumers trend toward canceling subscriptions to these traditional cable and satellite providers and turn to streaming media, we expect demand for STBs in certain regions to continue to decline.
If we are unable to derive additional revenue from the smart TV and DMA markets to make up for decreases in our STB-related revenue, our financial results may be negatively impacted.
Further, macroeconomic conditions such as inflation, geopolitical instability, global health risks, and other factors may adversely impact the ability of our partners to manufacture and distribute mobile devices and consumer demand for mobile devices.
For example, beginning with PCs shipping with the 24H2 version of Windows 11, Microsoft is changing the way Dolby’s DD and DD+ decoders are provided to third party PC OEMs.
For such devices, Dolby has begun distributing those codecs directly to PC OEMs instead of through Microsoft’s Windows operating system.
Our revenue and associated demand for Dolby Cinema and cinema products are affected by cinema industry and macroeconomic conditions, which are subject to risks including consumer trends and box office performance generally, delays in cinematic releases, the seasonality of film releases and associated moviegoing attendance, and other events or conditions in the cinema industry.
As an example, the COVID-19 pandemic and the restrictions related to the pandemic resulted in reduced cinema attendance and revenue.
Additionally, the strikes by the Writers Guild of America and SAG-AFTRA in 2023 effectively halted the production, release and promotion of certain films for an extended period, resulting in decreased box office receipts, which directly impacted the revenue generated by Dolby Cinema theaters.
Such disruptions in the past have impacted, and potential similar disruptions in the future could potentially impact exhibitors’ willingness and ability to invest in Dolby cinema products.
Customers and Distributors Our licensing business depends on the incorporation of our technologies into products and the sales of such products, which are, in large part, not within our control .
Consumer spending weakness may impact our licensees and licensing revenues generally .
Weakness in general economic conditions due to inflation, elevated interest rates, lower consumer confidence, a potential recession, pandemic or other adverse economic conditions, may suppress consumer demand in our markets and consumers going to the movies.
Our reliance on distributors may impact sales of certain products and present compliance risks.
We rely significantly on a global network of independent, regional distributors to market and distribute our cinema products.
Our distributor arrangements are non-exclusive and our distributors are not obligated to buy our products and can represent competing products.
Thus, they may be unwilling or unable to dedicate the resources necessary to promote our portfolio of products.
Our distributors could retain product channel inventory levels that exceed future anticipated sales, which could affect our future sales to those distributors.
In addition, failure of our distributors to adhere to our policies designed to promote compliance with global anticorruption laws, export controls, and local laws, could subject us to criminal or civil penalties and stockholder litigation.
Industry Standards Certain parts of our business are dependent on the inclusion of our technologies in industry standards, the adoption and development of which are not fully within our control.
The entertainment industry in particular has historically depended upon industry standards to ensure compatibility and interoperability across delivery platforms and a wide variety of consumer entertainment products.
Nonetheless, it can be difficult to have our technologies and products adopted as industry standards.
The market for broadcast technologies in particular has traditionally been heavily based on industry standards, in some cases mandated by governments choosing from among alternative standards, and we expect this to continue to be the case in the future.
This trend is reducing the importance of the inclusion of our technology in certain broadcast standards while increasing the importance of inclusion within internet and mobile industry standards.
Even when a standards-setting organization incorporates our technologies in an industry standard for a particular market or geographic region, our technologies may not be the sole technologies adopted for that market.
For example, the European Union (EU) legislature is considering regulation that would impose a number of requirements on standard essential patent (SEP) licensing practices in the EU.
Such regulation could, if it comes into effect, impose additional costs and disclosure requirements on our SEP licensing business and potentially reduce associated revenue.
We are regularly involved in discussions with third party technology licensees regarding license terms.
Similarly, the success of Dolby Cinema is dependent on our ability to partner with movie theater exhibitors to launch new Dolby Cinema sites and to deploy new sites in accordance with plans, and on the continued release and box-office success of new films in the Dolby Vision and Dolby Atmos formats released through Dolby Cinemas.
However, our patent program faces a number of challenges, including: • Possibility that innovations may not be protectable; • Failure to protect innovations that later turn out to be important; • Insufficient patent protection to prevent third parties from designing around our patent claims; • Our pending patent applications may not be approved; and • Possibility that an issued patent may later be found to be invalid or unenforceable.
As of September 27, 2024, we had approximately 27,400 issued patents in addition to 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 and 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.
In the case of our patent coverage related to DD, some of our relevant patents have expired, but others continue to apply.
DD is our solution that includes technology necessary to implement AC-3 as it has been updated over time.
We have continued to innovate and develop IP to support the standard and its implementation.
Our customers use our DD implementation for quality, reliability, and performance, even in locations where we have not had applicable patent coverage.
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.
Many of our partners have adopted newer generations of our offerings such as DD+, and the range of products incorporating DD solutions is now limited to DVD players (but not Blu-ray players) and some TVs, STBs and soundbars.
To continue to be successful in our audio licensing business, we must keep transitioning our DD licensees to our newer technologies, including our DD+ and Dolby AC-4 technologies.
We have often experienced, and expect to continue to experience, problems with non-licensee OEMs and software vendors, particularly in certain emerging economies, incorporating our technologies and trademarks into their products without our authorization and without paying us any licensing fees.

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Sentence-level comparison of Item 1A in the two most recent 10-Ks (FY2024 ↗, FY2025 ↗). A reworded sentence counts as one dropped and one added, so heavy edits read as low “kept”. Headings and page furniture are stripped; nothing is summarised by a model.

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