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New Developments in Digital Sound Technology Fuel Exhibitor and Consumer Sales

Impressive numbers for Dolby Digital and Dolby Digital Surround EX, introduced this year, as well as dramatic growth in licensing, brought revenues to more than $125 million for the fiscal year which ended in September.

``Trends in the market were very favorable for us in 1999,'' said Bill Jasper, President of Dolby Laboratories. ``In particular, there were noteworthy gains in demand for our cinenma formats and home entertainment technologies.

``Given a strong sales year in fiscal 1999 and some exciting new technologies in the pipeline, including Dolby Headphone and DVD Audio, we think this points to an impressive start to our next year, which is also Dolby's 35th anniversary as a company.''

Strong Growth in Cinema Market

--   Dolby Digital is the leading digital cinema format. With more
     than 25,000 theater installations worldwide, this is as many as
     all the other formats combined. In 1999, the company sold 7,000
     Dolby Digital film processors, up 1,600 over the previous year.

--   Dolby Digital is the world's most successful digital film release
     format in history with 2,250 films released. Nearly every print
     includes the Dolby Digital soundtrack automatically.

--   Dolby Digital Surround EX is the fastest-selling product in
     cinema sound history with more than 5,000 Dolby Digital Surround
     EX adapters (SA-10) sold in its introductory year. Jointly
     developed by Dolby and Lucasfilm THX, Dolby Digital Surround EX
     is quickly becoming the format of choice for blockbuster hits.
     Recent titles in Dolby Digital Surround EX include "Toy Story 2"
     from Buena Vista, "The World is Not Enough®" from MGM, "The
     Fight Club" from Twentieth Century Fox, "The Bone Collector" from
     Universal, and "The Messenger: The Joan of Arc Story" from
     Columbia.

``Our sales figures send a clear signal that Dolby Digital continues to be the film industry's audio format of choice,'' said Marketing VP Tim Partridge. ``Dolby sound systems are installed on over 54,000 screens worldwide and continue to be the preferred equipment in almost all new construction around the world.''

Digital Revolution Fosters New Growth in Home Theater Sales

--   The Leader in Consumer Multichannel Systems - Dolby Digital is
     the world's leading digital multichannel format for home theater.
     Every consumer with a 5.1 channel system in his or her home has
     Dolby Digital. With over 3 million Dolby Digital 5.1 decoders
     sold worldwide, there are four times as many Dolby Digital
     decoders in consumers' homes than the nearest competitor.
     Additionally, Dolby Digital has a growth rate at least twice that
     of any competing format.

--   Dolby Digital - the standard 5.1 format in Digital Consumer Audio
     - As multichannel surround sound is no longer the exclusive
     province of movie theaters, Dolby Digital has become the standard
     for 5.1 movies and music on DVD, digital television, and digital
     satellite systems in the U.S. and other countries around the
     world.

--   Leader in 5.1 Content - More than 3,700 DVD-Video titles have
     been released with Dolby Digital soundtracks. Over half of all
     "Hollywood" DVD movie and music titles have Dolby Digital 5.1
     soundtracks. Most of the remaining titles are older films
     released with either a Dolby Surround or 2-channel Dolby Digital
     mix.

--   Leader in DVD software sales - DVDs made in Dolby Digital 5.1
     significantly outpaced those of a competitive, optional 5.1 audio
     format in both the number of titles and the number of copies sold
     per title. There were 24 times as many titles released in Dolby
     Digital 5.1, and these titles outsold the other format by factors
     ranging from 17 to 1 for "Dances With Wolves," 36 to 1 for
     "Apollo 13," to 45 to 1 for the "Saving Private Ryan" DVD
     (Source: VideoScan (see Note)).

     Dolby Paving the Way with New Audio Technologies

--   Successful Launch of Dolby E - Recently introduced, Dolby E
     permits digital television (DTV) broadcasters and program
     producers to distribute multichannel surround audio far more
     conveniently and economically than previously possible, and
     gives consumers greater access to 5.1-channel digital audio in
     their homes via Dolby Digital broadcasts. Since the technology's
     official launch in April of this year, numerous broadcasters and
     program producers have already purchased Dolby E systems
     including Walt Disney Company, Sony Pictures, Viacom's Showtime
     Network, and many others.

--   AAC, bringing high quality audio to the Internet - In November
     1999, Dolby established the Advanced Audio Coding (AAC) licensing
     group to market a high-quality audio technology for the Internet.
     As the licensing administrator for the companies which developed
     AAC, Dolby is positioned to help this technology become a
     standard for consumers.

--   Dolby Headphone, Affordable Delivery for Multichannel Audio -
     Dolby Laboratories Inc. and Lake Technology of Sydney, Australia
     developed a new technology that allows consumers to enjoy
     multichannel surround sound on conventional stereo headphones.
     Dubbed "Dolby Headphone," the system will be featured primarily
     in multichannel audio/video products incorporating Dolby Digital
     or Dolby Pro Logic Surround decoding such as DVD Video players,
     upcoming DVD Audio players, set-top cable boxes, satellite
     receivers, digital televisions, VCRs, personal computers, video
     game consoles, A/V surround decoders, auto sound systems,
     multimedia speaker systems, and even headphone portables. The
     technology is currently available to Singapore Airlines (SIA)
     passengers on all classes of travel and will be incorporated into
     consumer products from manufacturers who have licensed the Dolby
     Headphone technology, beginning in 2000.

--   Increased use of Dolby Audio in Games - Dolby is committed to
     improving the sound quality of games. The application of Dolby
     Surround to computer and video games was the first step, while
     the application of Dolby Digital multichannel sound added
     significantly to the excitement of game play. To date there are
     more than 260 console-based, CD-ROM and DVD-ROM video games
     featuring Dolby audio technology. Popular Dolby Digital
     multichannel titles include "Lander" by Psygnosis and "Beneath"
     by Activision.

--   Most new PCs with DVD-ROM ship with a DVD-Video decoder, which
     includes Dolby Digital decoding. To date more than 15 million
     decoders have been shipped with a strong outlook continuing for
     2000. Dolby is also working with leading PC audio technology
     companies to integrate Dolby Digital into Interactive PC DVD and
     the next generation Console games.

Other Dolby Milestones in 1999

In 1999, a growing number of movie exhibitor chains committed to using Dolby Digital audio technology exclusively on all new installations, with United Cinemas International and National Amusements joining already announced Famous Players, Cinemastar Luxury Theatres and Pacific Theatres (in all auditoriums). In addition:

--   There are 2,250 Dolby Digital films released or announced; up 750
     from 1998

--   There are 9,520 Dolby encoded films; up 820 from 1998

--   Dolby films are mixed in 43 countries; up from 38 countries in
     1998

--   There are 164 distributors of Dolby cinema products in 58
     countries; up from 110 distributors in 50 countries in 1998.

About Dolby Digital Surround EX

Dolby Digital Surround EX adds a third surround channel to digital film sound, a concept first envisioned by sound designers at Lucasfilm's Skywalker Sound post-production facility. Jointly developed by Dolby Laboratories and Lucasfilm THX, Dolby Digital Surround EX gives mixers a new level of creative freedom.

Dolby Digital Surround EX is fully compatible with all current 5.1 digital formats and theater systems. Prints that use it play normally with current systems but provide the extra surround channel when played over systems equipped only with a new Dolby SA-10 adapter.

About Dolby Laboratories

Dolby Laboratories is the developer of signal processing systems used worldwide in applications that include motion-picture sound, consumer entertainment products and media, broadcasting, and music recording. Based in San Francisco with European headquarters in England, the privately held company also has offices in New York, Los Angeles, Shanghai, and Tokyo.

Note: VideoScan data contains only sell-through sales to consumers (consumer purchases) through channels of distribution covered by VideoScan's reporting retailers. VideoScan data will not include any product placed in rental. It also will not include sales that occurred in supermarkets, drug stores, mail order or direct mail, or any non-traditional channels of video distribution like bookstores, or specialty shops specific to the genre of any video. For a detailed list of reporting retailers, or to inquire about a specific retailer or channel, contact the VideoScan office.

Contact:

     CONTACTS: Dolby Laboratories
               Jim Arnold, 415/645-5116
                 jja@dolby.com
                    or
               Miller/Shandwick Technologies
               Lynne Daily, 310/203-0550
                 ldaily@miller.shandwick.com