Q-Sound

 May 18, 1994--QSound Labs, Inc. (NASDAQ:QSNDF; TSE:QSL) announced a software licensing agreement today with Sega Enterprises, Ltd., and its subsidiary, Sega of America, Inc. This agreement provides for Sega's first full implementation of real-time interactive QSound(TM) Virtual Audio.

QSound Labs will furnish Sega with processing software that will be included in all planned Sega(TM) 32-bit systems, starting with the new 32X. Sega is predicting first-year sales of 2.5 million Genesis(TM) 32X units when they become available worldwide late this year. QSound will also be available in a future platform being developed by Sega which will be introduced in Japan this fall and is expected to be introduced in the United States in 1995.

Developed through years of study of the human hearing process, QSound Virtual Audio is a revolutionary, proprietary, multi-dimensional sound placement technology which enables the user to localize sound in virtual space. With QSound, developers can move sound effects beyond the confines of the screen, greatly expanding the field of interaction between the player and the game.

The patented QSound Virtual Audio algorithm also provides software developers with the means to produce highly interactive, lifelike audio effects that add realism to any game. QSound's real-time audio motion capabilities make it the only technology in the market which enables sounds to respond immediately to visual cues. Sounds react instantly to the user's moves.

This expanded sound field and real-time responsiveness provide a total immersion experience in the game action that far surpasses the level of excitement provided by traditional sound effects.

The Sega-QSound contract is an expansion of QSound Labs current alliance with Sega of America which licensed QSound for Sega CD(TM) games in March of 1993. There are currently seven Sega CD titles with QSound, including Jurassic Park(TM), Sonic CD(TM), and Ecco the Dolphin(TM). To date, over 1 million units have been sold to enthusiastic response.

Sega's 32X will enable the 13 million Genesis(TM), Sega CD(TM) and Mega CD(TM) users to upgrade their existing hardware to the technological levels currently available in arcade and high-end home entertainment systems -- at one-third the cost of other 32-bit hardware.

Sega will use QSound in the development of its own games and sub-license QSound to their third-party software developers, Sega has more than 30 titles under development for the 32X and expects most of its third-party developers to license QSound for game development for the 32X system.

"The extension of our alliance with Sega of America and the introduction of QSound into the Japanese home video game market affirm the appeal of our innovative sound placement technology to today's industry leaders. This agreement clearly places us one step closer to becoming the industry standard," said David Gallagher, president of QSound Labs. "We are thrilled with the success of the current Sega CD platform and the positive response to the QSound-enhanced CD-ROM games."

"We expect the inclusion of QSound in Genesis 32X and other future platforms to provide the kind of leading-edge sound performance that underscores Sega's technology leadership," said Joe Miller, Senior Vice President of Product Development for Sega. "We've found QSound to be a valuable addition to the Sega CD platform and believe that this state-of-the-art audio technology will help us maintain our leadership role in the home video game marketplace."

Sega Enterprises, Ltd., is the leader in interactive digital entertainment. Based in Tokyo, Japan, with operations on five continents, Sega has yearly sales of nearly $4 billion. Sega of America is the subsidiary responsible for the development, marketing, and distribution of Sega products in the Americas.

QSound Labs is an audio technology company specializing in virtual sound localization and enhancement. QSound is currently marketing its technology to the PC/multimedia industry through contracts with such leaders as Creative Technology (SoundBlaster) and IBM as well as other video game manufacturers.