SRS Labs, Inc. (SRSL) develops and licenses audio technologies to OEMs in the home entertainment, portable media device, personal telecom, computing, automotive and broadcasting markets. Prior to September 2006, the company also supplied integrated circuits incorporating its proprietary technology. In September last year, management decided to sell off Valence, its wholly-owned subsidiary, through which it had carried on this business. The company is now focused on developing leading edge technologies, which it intends to license to major players in its targeted markets. Its technologies are patented under the SRS, TruSurround, TruSurround XT, FOCUS, Circle Surround, Circle Surround II, WOW, VIP and TruBass trademarks.
Audio technology is moving towards surround sound. This is basically the mixing of additional audio channels that enhance the sound field, leading to three-dimensional sound effects that "surround" the listener. The surround sound effect may be achieved in a number of ways psychoacoustic sound localization, wave field synthesis and ambisonics. The psychoacoustic sound localization technique uses the ability of humans to judge the location of the sound, such that they perceive the sound as coming from their surrounding, when in fact it comes from the source gadget (headphones). The other two methods are mainly used in PCs and home entertainment systems. Here, a number of speakers are placed very close together in such a way that they synthesize or reconstruct the original sound wave at a point outside the gadget, creating a sound frontier inside which the listener is unable to determine the location of the sound. Surround information is transmitted through the sound channel to a loudspeaker. In one-to-one transmission, each individual channel is mapped to the speaker designated to it. Alternatively, the transmitted signal could be encoded and rendered at the replay end by a decoder. The decoder is able to replay the information according to the number of speakers available for replay (matrix decoding). A significant aspect of audio transmission is the low frequency effects (LFE) channel, which transmits sub-bass sound effects such as thunder and explosions. Unlike movie halls, home entertainment systems usually do not designate a separate speaker for transmitting these signals. Instead, these systems have decoders with a built-in bass management system that allows bass to be played on any loudspeaker capable of handling LFE content.
SRSL's technology may be grouped under the surround sound, audio rendering and voice processing categories. Surround sound technologies include circle surround encoding (up to 6.1 channels of audio, which means 6 discrete audio channels and 1 LFE channel) for transmission or storage over two output channels or standard two-channel carriers and circle surround II decoding of up to 6.1 channels of surround and circle surround encoded content. Both circle surround and circle surround II are backward compatible with mono, stereo and all matrix decoders. SRS Mobile HD audio renders a 5.1 channel experience over headphones. TruSurround HD4 enables cinema quality sound in TVs without extra speakers or wires. This technology also offers improved bass response and greater clarity of vocals. The audio rendering line includes SRS Xspace 3D, SRS WOW, SRS WOW XT, SRS WOW HD, SRS TruBass, SRS FOCUS, SRS Headphone, SRS DialogClarity, SRS TruSurround XT, TruSurround HD, SRS 3D Sound and SRS CS Auto. SRS headphone 360 renders discrete multi-channel (5.1-7.1) and composite surround content over headphones. TruSurround XT converts mono, stereo or surround content to surround sound over just two speakers or headphones through post processing enhancements. TruSurround HD (targeted at mid-to-high end TVs) renders data from up to 6.1 audio channels over 2-3.1 speaker configurations. Circle Surround Auto enables 4-channel decoding from mono or stereo radio broadcasts, satellite radio, HD radio, digital broadcasts, standard CD and compressed audio from portable media players inside an automobile. The voice processing technology reduces noise in wireless communication devices, improving the clarity of the human voice in varying listening environments.
The home entertainment market is by far the largest end market, with a 2006 revenue contribution of 61% (up 51.9% over 2005 levels) followed by portable media devices with a 16% share (down -11.7%) PCs 9% (down -4.8%) personal telecom 8% (down -7.7%) and automotive 6% (up 153.9%). Although the bulk of revenue comes from licensing (on the basis of number of products sold by the customer), the company also sells some hardware and software into the PC and broadcast audio markets. The company generates most of its revenue in Asian countries (Japan 44%, Korea 30% and China 17% of total sales in 2006). The Americas generated 8% of 2006 revenue, while Europe accounted for less than 1%.
Important customers in 2006 were LG, Samsung, Toshiba and Sony in the home entertainment market and Motorola, Samsung, Pantech and NEC in the personal communications market. Samsung and Sony accounted for 17% and 11%, respectively, of consolidated revenue in 2006.
Most of SRSL's audio improvement products are pitted against competing products from Dolby, DTS, BBE Sound, and Qsound. Additionally, Nextel has developed a competing technology in the voice enhancement/noise reduction sphere. Most of its customers are also in the process of developing competing technologies in-house.