Microsoft’s Windows operating system has, over the years, got a good deal better at natively supporting media playback. It’s not perfect by any means – native Blu-Ray support remains a notable exclusion, and many codecs still won’t play without third-party software – but on the whole, media support on Windows has improved.
So news from Dolby Laboratories – disclosed in a post-earnings conference call with investors, and revealed by Forbes – that the company’s technologies have not been included in Microsoft’s new Windows 8 operating system may well raise a few eyebrows.
The proliferation of optical drives in new computers in recent years has so far guaranteed the widespread inclusion of Dolby technologies in PC shipments. Native support for Dolby Digital Plus is currently baked into Windows 7, delivering up to 5.1 channels of high-definition surround sound on playback of HD and DVD content.
Dolby has increasingly relied on the considerable revenues generated by the licensing of its technologies in PCs, and by its own admission, the weighting of those revenues has shifted more towards licensing at the OS level. If Microsoft chooses not to maintain this arrangement in Windows 8, Dolby will be forced to ensure continued support for its technologies on PCs by establishing new licensing agreements with PC and equipment manufacturers, and other third-parties, including developers and distributors of playback software.
The market did not react well to Dolby’s disclosure, with the company's shares falling almost 18% in Friday trading (we should note that the markets as a whole fell considerably and a generous portion of the decline is likely related to the weak market trends). Analysts at Chicago-based investment firm William Blair & Company, and London financial advisory group Collins Stewart, both downgraded Dolby stock ratings in reaction to the news.
The absence of Dolby technologies in current Windows 8 builds does not inherently imply that the OS will not support DVD playback or digital surround sound. It is possible that Microsoft will choose to license these technologies from another provider, or a deal may yet be reached that would see Dolby’s technologies natively supported as they are in Windows 7.