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DTS / Nielsen Entertainment Research Study Highlights The Importance Of Surround Sound To The DVD Marketplace In Europe (21/2/2006)

Consumers Becoming Sound-Savvy, Choosing Audio Options

DTS, Inc. (NASDAQ: DTSI) has announced the results of a DTS-commissioned study conducted in conjunction with Nielsen Entertainment Research, showing a solid base of home theatre and surround sound owners throughout the Western European marketplace. Revealing the importance of surround sound to the DVD market, the study shows the broadening demographic base of surround sound owners and the impact of surround hardware ownership on DVD consumption habits

ÒDTS has become a well-loved and well-used audio format for many consumers who prefer high quality surround sound. The study clearly shows that better picture and better sound are key features of DVD for home theatre owners and that is why so many consumers select DTS whenever they can," said Jon Kirchner, President and CEO of DTS. "With the wide proliferation of affordable home theatre systems, which can all play a DTS soundtrack, the support for DTS amongst consumers in Western Europe is becoming mainstream. DTS will continue to help build the surround sound segment by educating consumers about surround sound and DTS.Ó

STUDY RESULTS

The European research focused primarily on the UK, France and Germany. These territories represent 67% of total Western European DVD spend levels, illustrating the impact they have on entertainment consumption in general. Additionally, more than half (56%) of consumer spending on audio hardware equipment is generated out of these countries followed by Italy, Spain and Holland at a comparable 9% each.

The study identified that close to a third of Western European households have some configuration of a home theatre system, equating to over 50 million households. In the UK, France and Germany combined, over one-third of DVD households owned a home theatre system as of year-end 2004. Indicating the importance of sound to the home entertainment experience, a significant 80% of those home theatre owners have 5.1 or greater surround sound with five or more speakers.

As of the end of 2005, more than 102 million Western European households were expected to own one or more DVD players. These figures are reinforced by the marked increase in consumer spending, coupled with the availability of DVD titles, and a steady decline in software prices. By the end of 2004, Western Europe had spent almost $12 billion in DVD software sales alone, a 40% increase from the previous year. In addition, with HD ready displays (HDTV) in Europe forecast to rise over the next five years to slightly more than 30 million units, an upward swing in consumer adoption of home theatre systems in Europe is anticipated.

Home theatre and surround sound owners are avid DVD purchasers. They play a significant role in the consumption of DVD movies and purchase notably more DVDs (by over 38% in the UK, and 21% in France and Germany.) Furthermore, lead by the UK, surround sound owners own on average 83% more DVDs compared to DVD-only consumers. According to the study over half (anywhere from 51%-59%) of home theatre and surround sound owners are DTS-aware. In the UK, the DTS-aware consumer purchases three more DVDs or 39% more in a six-month period than non-DTS-aware consumers. A similar trend emerges in France, followed by Germany, where clearly the DTS-aware consumers are the most enthusiastic purchasers of DVDs compared to those not familiar with the brand. The study also found that consumers aware of DTS strongly agree that the DTS brand delivers the highest quality in the form of superior audio technology.

The Nielsen Entertainment study highlighted the important role that sound plays in enhancing the entertainment experience. When questioned on added value materials on DVD, all DVD consumers and surround sound owners from all three territories indicated that upgraded surround sound was the most important value added feature. Higher quality sound generates a solid ranking in comparison to other special features: For example, 77% of French DVD consumers in the study ranked upgraded surround sound as the most important special feature, compared to outtakes in second place with 55%.

There is also a significant upward trend in the percentage of DVD consumers who actively change their surround sound format settings at the beginning of a DVD movie. More specifically, a year-over-year comparison shows that French consumers are sometimes, if not always, selecting their sound options far more often when they watch a DVD, up from 55% in 2004, to 70% in 2005. In Germany, there was a small, but notable percentage point increase of those consumers who sometimes or always select their sound options.

The study concluded that advances in surround sound technology, hardware affordability, and the increase in surround sound features on DVD discs are yielding a more sound-savvy consumer. Surround sound owners are not just older males with unlimited disposable income. Today, the expanding demographic profile of these sound-savvy consumers has a growing base of female owners, ranges in age from 18-54 years old, and includes a broad income range anywhere from €15,000 to €75,000.

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