The increasing popularity of Blu-ray disc players has created record profits for companies producing the required audio technology – most notably DTS Inc.

And it looks like those profits will be coming a long time for the Calabasas company.

Last week, DTS reported net income of $4.8 million for the fourth quarter, compared with $3 million the prior year – a better performance than Wall Street expected. Revenue rose 16 percent to $21.2 million.

“Blu-ray is a real growth engine for the company,” said James C. Goss, a senior investment analyst at Barrington Research Associates in Chicago. “If you’re going to have a high-end video experience, you want it to be paired with a high-end audio experience.”

The performance stems from the unexpected strength of the Blu-ray medium, which some analysts thought might not catch on due to the sudden rise of digital video downloads. Equally important: a deal DTS cut in 2004 with the Blu-ray Disc Association that made DTS audio coding software a requirement for all Blu-ray machines.

The only other company producing similar coding is Dolby Laboratories Inc., a much larger San Francisco company.

“We saw Blu-ray firmly establish itself as the next major physical media for home entertainment,” said DTS Chief Executive Jon Kirchner in a press release. “The growing consumer interest in Blu-ray … is setting the stage for an expanded DTS footprint in the online market.”

Blu-ray optical technology emerged in 2008 as the victor in a protracted battle with a competing high-definition disc format called HD DVD. However, many analysts thought that the battle might have critically hurt adoption of the technology.

But consumers have begun snapping up Blu-ray players. In the fourth quarter, 46 percent of all video disc players sold in the United States were Blu-ray, compared with 20 percent a year earlier.

That increase has been driven largely, Goss said, by a drop in retail price, which has fallen from about $1,000 for a Blu-ray machine in 2006 to an average of $150 during the most recent holiday season. All of which has set the stage for DTS to experience even more major growth.

“Initially there will be continued growth in Blu-ray players,” Goss said. “The stand-alone devices will be important, but there will also be growth in PC drives as more and more of them become Blu-ray.”

Additionally, he said, DTS audio technology will be licensed by makers of the next generation of cell phones and other mobile devices that have enhanced download video capabilities using Blu-ray.

“The wave of the future, as currently defined, has been caught by DTS,” Goss said.

Staff reporter Deborah Crowe contributed to this story.

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