An Irvine-based startup backed by Yogurtland founder Phillip Chang has signed its first licensing deal to imbed audio compression technology in a pricey smartphone with dual displays.
Psyx Research Inc., established in 2013 by two audio engineers and a musician and telecom executive, is licensing its software to Moscow-based Yota Devices, maker of a niche Android smartphone that will cost about $600 when the brand debuts in the U.S. with the launch of the second-generation device after an Indiegogo campaign. Yota said it sold more than 30,000 units of the first-generation phone.
‘Opportunity’
The Yotaphone deal could provide a boost to Psyx, which will receive a 50-cent royalty per unit. It’s estimated that more than 2 million units will be sold, with in-house forecasts as high as 3 million.
“That’s the size of the opportunity today,” said cofounder Mark Reasinger, a former Samsung sales executive who has production and writing credits on albums created by Pitbull, T.I. and Akon.
The opportunity is expected to expand when Yota, considered a tier 2 or tier 3 manufacturer, launches a 7-inch tablet this year.
“We would be integrated in all those products, as well,” Reasinger said. “Yota is not a tier 1 [original equipment manufacturer], but they’re positioning themselves to be.”
Yota, which received multiple awards this year at the International CES trade show in Las Vegas, has been lauded in tech circles for its uniquely designed “two-front” smartphone, a first in the industry, but has faced adoption challenges due to its high price, limited distribution in Europe and Asia, and the ongoing popularity of Samsung and Apple smartphones.
Yotaphone distinguishes itself with a display on both sides of the device but otherwise operates like any smartphone.
The phone grabbed international attention last year when Russian President Vladimir Putin gave one to China President Xi Jinping at the Asia-Pacific Economic Cooperation summit in Beijing.
Qualcomm Link
A key aspect of the deal ultimately links Psyx with San Diego-based Qualcomm Corp., the world’s third largest chipmaker that dominates baseband chip supply for smartphones.
Baseband chips serve as the technical brains of mobile phones.
Irvine-based Broadcom Corp. spent billions over the years trying to gain a foothold in the lucrative segment but ultimately sold the line of business last year in a restructuring that included layoffs of 20% of its global workforce and office closures.
Psyx has been working for months to integrate its software—which masks digital artifacts that distort sound during playback—into the Qualcomm chip.
The software also recreates data lost during the compression process.
The relationship with Qualcomm could open doors for the young company, boost its legitimacy in the industry, and forge an entree into the automotive segment, a key market Psyx executives have targeted for growth as more automakers add connectivity to new vehicles.
“That’s part of our mobile strategy,” Reasinger said. “We’re far enough along with our relationship with Qualcomm and our development, I’m confident in a very short period of time we’ll have the ability to go into every Qualcomm chipset going forward that includes mobile, auto and any other devices they’re looking at.”
EarPrint
The company also aims to bring in revenue through its recently launched EarPrint app, which allows iOS and Android users to choose from among a handful of adjustable sound settings to suit their listening tastes.
The app, which basically mimics the Yotaphone software technology offering, clears up bad feedback during the compression process. Such feedback is a primary reason music sounds better in a car’s front seat than in the back.
“We’re restoring the lost dynamics,” said cofounder and Chief Technology Officer Paul Beckmann, a former vice president of engineering at Enuvis Inc. and researcher and product developer at Bose Corp.
A professional version of the app costs $5.
The largely boot-strapped company has been funded with founders’ capital and an undisclosed investment from Chang, who launched the Yogurtland franchise in 2006 as an addition to his Boba Loca Inc. business, which he sold a few years ago for an undisclosed sum.
Its offices and engineering studio are in Yogurtland Franchising Inc.’s headquarters near John Wayne Airport.
Chang, who’s grown Yogurtland to about 300 locations and $173 million in annual revenue, played bass and sang in a gospel band at a Los Angeles church in the 1990s.
“I believe in what Psyx Research is doing to improve sound quality,” said Chang, one of the recipients of last year’s Business Journal Excellence in Entrepreneurship Awards. “Music is our common connection, and I’m glad to be able to help Psyx with my business management experience,” he said.
‘Hiding the Stuff’
Psyx’ technology is rooted in the science of sound perception known as psychoacoustics. Beckmann and cofounder and Chief Scientist R.W. Reams have several patents in the field.
“We’re not fixing anything, we’re not repairing anything, we’re not restoring anything,” said Reams, a sound engineer who cofounded audio products makers Conneaut Audio Devices and Neural Audio, the latter of which helped XM Radio boost its offerings from 70 channels to more than 220 over several years. “What we’re doing is hiding the stuff that’s unnatural sound.”
Kirkland, Wash.-based Neural Audio was acquired in 2009 for $7.9 million by DTS Inc.
Calabasas-based DTS made a splash in OC three years later, acquiring SRS Labs Inc. in Santa Ana for $148 million in a cash-and-stock deal.
SRS makes software and other components that boost sound quality in audio devices.
