Dolby SVA was by far the more significant sound format made by Dolby Laboratories, as it brought high-quality stereo sound within the reach of virtually every cinema. Though 7-track magnetic stereo had been used in Cinerama films since 1952, and Fox had introduced 4-track stereo magnetic sound as part of the CinemaScope system in 1953, the technology had proved to be expensive and unreliable. Except in large cities, most movie theaters did not have facilities for playing back magnetic soundtracks, and a majority of films continued to be produced with mono optical soundtracks. Dolby SVA provided a method for putting high-quality stereo soundtracks on optical sound prints.
The optical soundtrack on a Dolby Stereo encoded 35 mm film carries not only left and right tracks for stereophonic sound, but also—through a matrix decoding system (Dolby Motion Picture matrix or Dolby MP) similar to that developed for "quadraphonic" or "quad" sound in the 1970s—a third center channel, and a fourth surround channel for speakers on the sides and rear of the theater for ambient sound and special effects. This yielded a total of four sound channels, as in the 4-track magnetic system, in the track space formerly allocated for one mono optical channel. Dolby also incorporated its A-Type noise reduction into the Dolby Stereo system.
The original involvement by Dolby Labs in movie sound was when film studios used Dolby A-type noise reduction on studio magnetic film recordings. The first film to use Dolby noise reduction throughout the production process was A Clockwork Orange, though much of the benefit was lost when it was released with a standard "Academy" optical soundtrack. This led to a proposal from Dolby that A-type noise reduction be applied to the optical soundtrack on release prints.
At that time (the early 1970s) there was renewed interest in improving the quality of optical soundtracks, which had changed little since the 1930s. In particular, the infamous "Academy curve" (the standard frequency response for cinema playback of optical tracks as specified by the Academy of Motion Picture Arts and Sciences in 1938) was still in use. It involved a drastic roll-off in the high-frequency response of the theater system with the intention of reducing the audibility of noise and distortion. Dolby proposed replacing the Academy curve with Dolby A-type noise reduction on the track. Starting with the 1974 film Callan, ten films were released with a Dolby encoded mono soundtrack. Theaters were equipped with a Dolby A-type noise reduction module and a third-octave equalizer to equalize the electro-acoustic frequency response of the speakers/auditorium. It created a new international standard for cinema sound.
Though the system worked well, theater owners were reluctant to invest in the technology until stereo was added to the mix. The idea of putting a two-channel optical stereo soundtrack in the normal soundtrack area of a film print was not new; the stereo pioneer Alan Blumlein had made experimental stereophonic films using such a system as early as 1933, and J. G. Frayne of Westrex had proposed a similar system to the SMPTE in 1955.
By 1970, however, it was apparent that magnetic recording methods were not going to displace optical soundtracks on most release prints, and in the early 1970s Eastman Kodak revived the idea, as described by R. E. Uhlig in a paper presented to the SMPTE in 1972. Initially using a two-channel, 16m film recorder built for them by RCA, Kodak recorded two-channel stereo soundtracks much as Blumlein and Frayne had done before, but added Dolby noise reduction to improve the limited dynamic range available from these half-width tracks.
There was one problem left to solve: the absence of a center channel, regarded as essential to lock screen-center dialogue to the middle of the screen. Uhlig discussed this issue in a follow-up paper. He considered the possibility of splitting the soundtrack area three ways to provide a third center channel but dismissed it because of the negative impact it would have on dynamic range and the problems involved in converting film projectors. Instead, he suggested feeding a center-channel speaker with a simple mix of the left and right channels; however, this is not entirely satisfactory as it degrades the stereo separation.
At this time Dolby joined forces with Kodak in developing this system. Dolby's solution to the center-channel problem was to use a "directionally enhanced" matrix decoder, based on those developed for domestic "Quadraphonic" systems, to recover a center channel from left and right channels recorded on the film. The matrix decoder originally employed for this used the Sansui QS matrix under license. This system was used for the 1975 Ken Russell film Lisztomania.
The matrix was then extended to provide a fourth channel for surround loudspeakers, allowing for a 4-channel system with the same speaker layout as the CinemaScope 4-track magnetic stereo system of the 1950s, but at a far lower cost.
Dolby Stereo, as this 4-channel system was now branded, was first used in 1976's A Star is Born. From spring 1979 onward, a new custom matrix replaced the Sansui QS matrix. It was first used in that year's Hair and Hurricane.
At first Dolby, Stereo equipment was installed mainly in larger theaters already equipped with amplifiers and speakers for CinemaScope 4-track stereo. But the success of 1977's Star Wars, which used the 4-channel system to great effect, encouraged owners of smaller theaters to install stereo equipment for the first time.
A key feature of this system was its backward compatibility: the same print could play anywhere, from an old drive-in theater with mono sound to a Dolby Stereo-equipped cinema, eliminating the need for a costly double inventory of prints for distribution. The success of Dolby Stereo resulted in the final demise of magnetic stereo on 35mm release prints. From then on, only 70mm prints used magnetic sound.
In the early 1990s, Dolby SR noise reduction began to replace Dolby A-type NR in a 35mm motion picture exhibition. All release prints encoded with Dolby Digital include a Dolby SR analog soundtrack, both as a backup in case the digital track malfunctions and for theaters not equipped for Dolby Digital playback.
Today, as of 2019; Dolby Stereo still exists, although its market share in the cinema space has quite declined, with the advent of digital cinema. It serves as a backup for movie theaters, still exhibiting films on 35mm film.