As the second largest provider of audio technology, DTS Inc. has the world by the ears. With headquarters in Calabasas, research labs around the globe, including Ireland and Singapore and revenue in 2011 of $97 million, DTS strives to give a viewer or listener a compelling experience on DVD, mobile device, tablet computer or video-game console. Only competitor Dolby Laboratories Inc. has more reach. Heading up the company is Chairman and CEO Jon Kirchner, who has been with DTS since 1993, when it got its start in Westlake Village. With backing from Universal Pictures and Steven Spielberg, DTS brought innovation and change first to the movie theater experience and then to consumer electronics products, which is now its focus. Kirchner ascended in the executive ranks, becoming president in 1999 and chief executive in 2001. Kirchner calls the development of audio technology part art and part science. At DTS, trial and error at the development stage combines computer science, electrical engineering and psychoacoustics, the study of sound perception. While online downloads and streaming represent the future of entertainment distribution, Kirchner doesn’t see the physical format, specifically Blu-ray discs, disappearing. DTS currently provides the audio to about 85 percent of the Blu-ray releases from the major Hollywood studios in North America. Blu-ray players, meanwhile, have become hybrids capable of playing the physical discs and using Ethernet jacks and online connections for downloads and apps. “It is a product that has a long shelf life,” Kirchner said. Question: Why does audio matter in the overall entertainment experience? Answer: Sound drives emotion in every entertainment experience. If you turn off the sound and you measure the emotion, or think of how of you might feel, you will have a distinctly different experience absent the audio. Your brain is wired in a way where your eyes and ears work as complements to each other, and therefore sound will remain an incredibly powerful and important part of the experience. Q: What is DTS’s role? A: We have spent the last 18 years designing and building the highest performance audio solutions for customers. We work day and night to create more compelling audio experiences for consumers worldwide. We work with artists and the content providers to give them the tools that will allow them to make more compelling experiences. Q: How has DTS become a leader in the entertainment industry? A: We catalyzed the revolution in theatrical sound 18 years ago, when we first launched the business with a product for theaters. We spent the last 15-16 years establishing the benchmark for high-quality audio in the home and on portable devices. We are the premier provider of high-definition audio today in the entertainment and consumer electronic business. We continue to lead from the front by developing innovative audio solutions that raise the bar on the experience. Q: Do you do all of the research and development here in Calabasas? A: No, we do it all over the world. We’ve got offices in 13 different locations around the world and we split the R&D between Silicon Valley, L.A., Ireland, Seattle and Singapore. Q: You predicted three years ago that Blu-ray was going to be a big story for DTS. Is that still the case? A: Blu-ray has grown incredibly well and today represents the benchmark of high-quality entertainment delivery for movies in the home. As that business has grown quite substantially we have benefitted greatly and think the long-term prognosis for Blu-ray is quite good. That being said Blu-ray has become more ubiquitous in homes throughout the world and so has the acceleration of network-connected entertainment delivery, whether downloaded or streaming. It is smaller on a dollar basis, but a move toward electronically-delivered entertainment. We have spent a lot of time supporting the Blu-ray growth, which we think will continue, while at the same time really focusing on network-connected entertainment products as being the next future of entertainment. Q: How is designing audio for a movie theater different from designing for a mobile device or tablet? A: Every environment is different. You have different kinds of considerations — the size of the space, the distance of the viewer, the listener from both the speaker and the screen. You’ve got different limitations. For example, in a theater you could put speakers as big as vans behind that screen. Whereas on a cell phone, you have a single speaker and it’s probably not in right place for optimal audio. Q: How do you test your audio products? A: There is a lot of time and effort in the R&D labs. We have a required certification program for our customers. So when they license DTS technology, they are required to submit their products for certification and we test them based on test scripts and programs that we write to ensure the quality. Q: Your business model is based on licensing your technology? A: Correct. We provide embedded software to consumer electronic manufacturers. They put our technology inside their products and brand them appropriately as DTS. We work with the studios to create content that is distributed in DTS format. When you take DTS-enabled content and play it on a DTS-enabled device you end up with a better experience. Q: Steven Spielberg was involved with DTS from the beginning wasn’t he? A: Steven Spielberg and Universal Pictures were early investors and supporters of DTS. We have benefited from their industry knowledge, support and wisdom over the years. Q: What was their interest in DTS and audio technology? A: Their interest was about delivering their movies in a more compelling way. If you wanted to hear a movie that a guy like Steven spent six, eight weeks in the post-production stage making, the only way you could hear it would be if you went to a 70mm theater. 70mm had the ability to put six channels of sound on the film print, whereas 35mm film at the time could only deliver a stereo track. We came out with a way of taking six-channel sound and bringing it to your standard theater. On opening night of “Jurassic Park” in 1993, there were 876 theaters playing in DTS audio. That launched our business. Theaters rapidly adopted digital sound systems in standard theaters. We were a dominant audio systems provider in the theatrical space for quite some time and then turned our attention to the consumer space. Q: DTS got out of the theater business in 2007. What was the reasoning behind that move? A: The theatrical business was going through some major technological change. From a portfolio management perspective, we had two different businesses that had different investment requirements, different return prospects and different needs. With the tension between them, it made more sense to focus on the one with the best long term opportunity, which happens to be the consumer business. Q: How has your background as a CPA helped in your job? A: When running a public company, it is helpful to have a financial understanding, given the way the markets work. We started as a startup in a small space in Westlake Village and have grown to be a global business. It is helpful to have a strong ground in things financial because you invariably have to figure out how to finance a growth business. Growth businesses are historically always in need of capital, or always trying to manage a larger set of opportunities than one has the resources to pursue. I have been fortunate. That background has enabled me to approach the job with discipline and understanding that has helped us to grow the business in a successful way. Q: Has your role as CEO changed since you took that position in 2001? A: We have a bigger, more sophisticated management team today than we did 10-12 years ago. A lot of my focus today is on strategy and dealing externally with the investment community and managing and overseeing the business at a higher level. I am less involved in the day to day details than I used to be when we were smaller. Q: You named the late UCLA basketball coach John Wooden as your most admired person. Why is that? A: I was an athlete growing up and a lot of my view on life is influenced by sports and the competitive process of preparation, commit and teamwork. I think Wooden not only had an unbelievable run of success, but managed to do it in a way where he had clear principles, clear values. He was a teacher. He was a leader. He was a motivator. He raised the bar of everyone around him in a direct and practical way. Q: What sports do you play? A: Basketball and tennis are my two preferred sports these days. Q: What qualities do you exhibit on the basketball court that you bring to the workplace? A: Competiveness. We have always been a small competitor in a space long dominated by a single competitor. We get up every morning and relish the challenge. The drive to compete and to learn through competition is something that we bring to work every day. Being a team sport player, I believe deeply in the importance of teamwork. We are better together than we are individually. In a business world that is fast-paced and requires global coordination, we rely on that to be successful. Q: What are some your favorite movies from a sound perspective? A: “Gladiator” would be one. Some are more subtle. “Red Violin,” there is something soft and interesting about that soundtrack. “Saving Private Ryan” would still be at the top of the list. When the movie was made they brought some veterans to see it. Coming out of the screening, some of the vets said it was the first time since having been on the beach (at Normandy) that they distinctly remembered exactly what it felt like to be there. It was almost too real.
The Science of Sound
