Initial development efforts were conducted for Sony's Columbia Pictures Sound Department under contract with Semetex Corp. of Torrance, California.

As Sony engineers became more actively involved in the project, the design of the SDDS format evolved toward a more robust implementation, including the use of 5:1 ATRAC data compression, extensive error detection and correction, and most critically redundancy.

In addition, in the early days of the "megaplex explosion", Sony struck a deal with AMC Theatres in 1994 to include SDDS in all of their new auditoriums.

Additionally a drop-out resulting in a switch to Analog (Analogue) may produce a slight loss of fidelity and high and low-ends, although it is more difficult to tell in a properly calibrated auditorium[citation needed].

As Dolby Digital (and to a lesser degree, DTS) began to emerge as the clear winner in the digital sound battle, Sony Cinema Products quit manufacturing SDDS encoders and decoders, although it will continue supporting equipment that is still deployed in the field.

The format carries up to 8 channels of Dynamic Digital Sound (DDS) encoded using Sony's ATRAC codec with a compression ratio of about 5:1 and a sampling rate of 44.1 kHz.

CCDs (Charge-Coupled Devices) read the SDDS data and convert the stream of dots on the film into digital information.

The decoder receives the information from the reader and translates it into audio signals routed to the cinema's power amplifiers.

Since SDDS is read at the top of the projector, the data is delayed slightly to restore synchronization with the picture.

And finally, adjustments in tonal balance and playback level are made to match the specific auditorium's sound system and acoustics.

SDDS is designed to process sound entirely in the digital domain, bypassing any existing analog processor, preserving clarity and providing full dynamic range.