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DTS and Dolby Digital (AC-3), DTS's chief competitor in the cinema and home theatre markets, are often compared because of their similarity in product goals, though Dolby believed that the surround channels should be diffused{{clarify|date=May 2016}} and DTS said they should be directional.{{citation needed|date=March 2016}} In theatrical installations, AC-3 audio is placed between sprocket holes on the 35 mm film itself, leaving the audio content susceptible to physical damage from film wear and mishandling. DTS audio is stored on a separate set of CD-ROM media, with greater storage capacity that affords the potential to deliver greater audio fidelity and is not subject to the usual wear and damage suffered by the film print during the normal course of the movie's theatrical screening. Disregarding the separate CD-ROM assembly as a potential point of failure, the DTS audiopath is comparatively impervious to film degradation, unless the film-printed timecode is completely destroyed.
In the consumer market, AC-3 and DTS are close in terms of audio performance. When the DTS audio track is encoded at its highest legal bitrate (1509.75 kbit/s), technical experts rank DTS as perceptually [[Transparency (data compression)|transparent]] for most audio program material (i.e., indistinguishable to the uncoded source in a [[double blind]] test).{{Citation needed|date=April 2011}} Dolby claims its competing AC-3 codec achieves similar transparency at its highest coded bitrate (640 kbit/s). However, in program material available to home consumers (DVD, broadcast, and subscription digital TV), neither AC-3 nor DTS typically run at their highest allowed bitrate. DVD and broadcast (ATSC) HDTV cap AC-3 bitrate at 448 kbit/s. But even at that rate, consumer audio gear already enjoys better audio performance than theatrical (35 mm movie) installations, in which
AC-3 and DTS are sometimes judged by their encoded bitrates.{{citation needed|date=March 2016}} Dolby Digital 5.1 can compress the same data to less, taking up minimal space. Conversely, DTS proponents claim that the extra bits give higher fidelity and more dynamic range, providing a richer and more lifelike sound. But no conclusion can be drawn from their respective bitrates, as each codec relies on different coding tools and syntax to compress audio.
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