DTS Technology Mandatory Audio Format For Blu -Ray & HD -DVD Next Generation Disc Standards

Single Audio Track Provides High Performance For New Formats & Backward Compatibility With All Existing DTS Decoder-based Consumer Electronics Products

Agoura Hills, CA - September 27, 2004 - DTS (Digital Theater Systems, Inc.) (NASDAQ: DTSI) today announced that its DTS Coherent Acoustics coding system has been selected as mandatory audio technology for both the Blu -ray Disc (BD) and High Definition Digital Versatile Disc (HD -DVD), the two next generation high -definition disc formats for home video. In addition to the Company's core technology, DTS' extension technologies have also been selected as options. Encompassing higher data rates, lossless operation and additional channels, DTS' extension technologies, identified by the DVD Forum (HD -DVD) and Blu -ray Disc Association collectively as DTS++, have been approved as optional features on both HD -DVD and Blu -ray Disc. DTS++ is also the only lossless audio technology selected for both disc formats.

"As a mandatory technology in the next generation standards, a DTS decoder will be built into every next generation player that incorporates either HD -DVD or Blu -ray Disc, therefore allowing content providers the freedom to choose the audio technology best suited for their needs," said Jon Kirchner, President and CEO of DTS. "We are both excited and pleased, and believe that this is a vote of confidence in DTS' technology and market leadership. Although we do not expect to see revenue until the next generation products become available, we believe the mandatory inclusion sets the stage for a very positive future."

"Over the past several years, we have seen a marked increase in DVD titles that include DTS soundtracks, and we expect this number to accelerate as DTS becomes an audio standard for next generation formats," said Patrick Watson, Senior Vice President, Strategy and Business Development at DTS. "The mandatory inclusion of DTS in both the HD -DVD and Blu -Ray standards demonstrates the industry's support for value -added DTS audio technologies. At the same time, DTS remains committed to artists, consumers and the industry by continuing our tradition of developing new technologies that offer superior performance and backwards compatibility."

DTS Coherent Acoustics
DTS Coherent Acoustics, first introduced into the market in 1996, was designed to be both extensible and backward -compatible based on its core + extension structure. Subsequent extensions to the original 5.1 -channel format were an additional discrete channel for 6.1 -channel audio (DTS -ES), and a 96 kHz sampling rate for high -resolution audio (DTS 96/24.) DTS audio tracks using either of these enhancements can be played on any existing DTS decoder, making them compatible with more than 280 million DTS -licensed consumer electronics products today, with advanced decoders able to play the added data.

Now, with the extra space and bandwidth afforded by HD -DVD and Blu -ray Disc, content providers and consumers alike can appreciate DTS audio tracks encoded at data rates greater than 1.5 Mbit/s, all the way to fully lossless operation - meaning that the soundtrack is bit -for -bit identical to the master. Both the mandatory DTS core technology, as well as optional higher sampling rates such as DTS 96/24 and additional channels up to 7.1, enable both Blu -ray Disc and HD -DVD formats to offer DTS' premium audio quality to consumers while retaining compatibility with all existing DTS decoders. This is the only approved coding system offering this range of performance yet maintaining full backward compatibility, therefore allowing a single audio track to provide advanced features and to support the large population of existing multi -channel preamps and receivers.

HD -DVD and Blu -ray Discs are next generation packaged media formats with large storage capacity capable of high -definition video in addition to other advanced technologies for an enhanced consumer experience.

For more information on HD -DVD, please visit www.dvdforum.org.

For more information on Blu -ray Disc, please visit www.blu -raydisc.com.

About DTS
DTS (Digital Theater Systems, Inc.) (Nasdaq: DTSI) is a digital technology company dedicated to delivering the ultimate entertainment experience. DTS decoders are in virtually every major brand of 5.1 -channel surround processors, and there are more than 280 million DTS -licensed consumer electronics products available worldwide. A pioneer in multi -channel audio, DTS technology is in home theatre, car audio, PC and game console products, as well as 5.1 Music Discs, DVD -Video, DVD -Audio and DVD -ROM software. Additionally, DTS is featured on more than 22,000 motion picture screens worldwide. Founded in 1993, DTS is headquartered in Agoura Hills, California and has offices in the United Kingdom, Japan and China. For further information, please visit www.dtsonline.com.

DTS, DTS -ES and DTS 96/24 are trademarks of Digital Theater Systems, Inc.

This press release contains forward -looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks, uncertainties, assumptions and other factors which, if they do not materialize or prove correct, could cause DTS' results to differ materially from historical results or those expressed or implied by such forward -looking statements. All statements, other than statements of historical fact, are statements that could be deemed forward -looking statements, including statements containing the words "planned," "expects," "believes," "strategy," "opportunity," "anticipates" and similar words. These statements may include, among others, plans, strategies and objectives of management for future operations; any statements regarding proposed new products, services or developments; any statements regarding future economic conditions or financial or operating performance; statements of belief and any statements of assumptions underlying any of the foregoing. The potential risks and uncertainties that could cause actual growth and results to differ materially include, but are not limited to, the rapidly changing and competitive nature of the digital audio, consumer electronics and entertainment markets, the Company's inclusion in or exclusion from governmental and industry standards, customer acceptance of the Company's technology, products, services and pricing, risks related to ownership and enforcement of intellectual property, the continued release and availability of entertainment content containing DTS audio soundtracks, changes in domestic and international market and political conditions, and other risks and uncertainties more fully described in the Company's public filings with the Securities and Exchange Commission, available at www.sec.gov. DTS assumes no obligation to update any forward -looking statement to reflect events or circumstances arising after the date on which it was made.

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