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Audio levels display on a digital audio recorder (Zoom H4n)
October 3, 1938: British telephone engineer Alec Harley Reeves files at the French Patent Office the first patent describing the technique known today as pulse-code modulation (PCM). Later, Reeves files also in the USA on November 22, 1939. It was first proposed as a telephony technology.
1943: Bell Telephone Laboratories develops the first PCM-based digital scrambled speech transmission system, SIGSALY, in response to German interception of military telephone traffic during World War II. The twelve transmission points were retired after the war.
January 1971: Using NHK's experimental PCM recording system, Dr. Takeaki Anazawa, an engineer at Denon, records the world's first commercial digital recordings, The World Of Stomu Yamash'ta 1 & 2 by Stomu Yamash'ta (January 11, 1971) and Something by Steve Marcus & Jiro Inagaki (January 25, 1971). Both have to be recorded live, without edits. Marcus is released first (in February 1972), making it the first released digital recording. On January 27 Yamash'ta records Metempsychosis in the Nippon Columbia studio, Tokyo, with percussion and a brass section.
1972: Using lessons learned from the NHK encoder, Denon unveils the first 8-channel PCM encoder, the DN-023R, which uses 47.25 kHz 13-bit PCM resolution and 4-head open reel broadcast video tape recorder. The first recording with this new system is the Smetana Quartet performing Mozart's String Quartets K.458 and K.421, recorded in Tokyo April 24-26 and released that October. At least six other Denon-recorded digital LP records are released in October, including jazz, classical and traditional Japanese music.
May 1975: University of Utah professor Thomas Stockham develops a PCM digital audio recorder of his own design, using computer tape drives as the storage system. He founds the company Soundstream to offer it commercially. Between 1977 and 1980 a total of eighteen 4-channel 50 kHz 16-bit units were manufactured, of which seven were sold (at about $150,000 each). Over 200 recordings were made on his equipment, almost half of all digital classical recordings made in the 1970s.
1976: the prototype Soundstream 37.5 kHz, 16-bit, 2-channel recorder is used to record the Santa Fe Opera performing Virgil Thomson's opera The Mother of Us All for New World Records, making it the first US digital recording. However, the digital recorder is just a backup to the main analog multi-track recorder, and the analog recording is deemed superior and thus used for the LP release. The backup digital tape was presented at the October 1976 AES Convention in New York, but never commercially released.
1977: Denon develops the smaller portable PCM recording system, the DN-034R. Like the DN-023R it records 8 channels at 47.25 kHz, but it uses 14-bits "with emphasis, making it equivalent to 15.5 bits." It also allowed for overdubbing for the first time, crucial for professional recording.
August 28-31, 1977: Soundstream's second-generation PCM system runs in the background of a California direct to disc recording session by organist Virgil Fox for Crystal Clear Records. When initially released the resulting LPs were pressed from the direct-to-disc acetate, though the later CD reissue (1987) comes from the digital backup tapes when the acetates were no longer usable. The CD reissue was made by Bainbridge Records.
September 1977: Sony introduces the PCM-1 Audio Unit ($4400 street price) (44.056 kHz, 14-bit), the first consumer (well-heeled) PCM encoder. It required the use of a home video tape recorder for storage.
November 4-7, 1977: 3M demonstrates a prototype 2-channel 50.4 kHz 16-bit digital recorder running on 1-inch tape at 45 ips at the New York AES Convention. As no true 16-bit converters were available, it combined separate 12-bit and 8-bit converters to create 16-bit performance.
November 28, 1977: Denon brings their DN-034R to New York City's Sound Ideas Studios and records Archie Shepp's On Green Dolphin Street, making it America's first released digitally-recorded commercial album. The following two days, November 29-30, Frank Foster and the Loud Minority record Manhattan Fever which is released April 1978. Five other jazz albums are recorded with the DN-034R in New York before it returns to Japan in December.[failed verification]
March 1978: Sony introduces the professional-grade PCM-1600 Audio Processor (44.056 kHz, 16-bit) (list price $40,000) used with an external U-matic tape drive, making digital recording commercially available to recording studios for the first time. PCM-1610 and PCM-1630 follow.
Early June 1978: Sound 80 records Flim and the BB's debut self-titled album as another direct to disc recording again with the experimental 3M recorder in the background. Again the acetate is deemed not as good as the digital backup, so the digital master is used for the LP record (Sound80 Records S80-DLR-102). This makes it the first U.S. non-classical digital release. Within 6 months the hand-built ("very bulky and finicky") 3M digital recorder is disassembled, rendering the non-standard master tape unplayable. Therefore, no Compact Disc reissue is possible. The compact disc issue of the St. Paul Chamber Orchestra is unexplained.
December 1, 1979: The Grammy-award winning self-titled Christopher Cross album is released. Cross' album becomes the first digitally recorded album to chart (recorded on the 3M system) in the United States, eventually winning 5 Grammys. Digital recording is now mainstream.
1980: Soundstream merges with Digital Recording Corporation, becoming DRC/Soundstream, to develop and market 50 kHz PCM recording to an optical card. Eclipsed by the rise of the 44.1 kHz Compact Disc, the company is out of business after 1983.
1981: Sony releases the PCM-F1 Digital Audio Processor ($1900)(44.056 kHz, 16-bit) and matching SL-2000 Betamax VCR ($700) as a complete affordable portable (with optional batteries) home digital recording system 
August 17, 1982: The first compact disc manufactured, ABBA's The Visitors (because it was "mostly digitally recorded") is produced in Hanover, Germany. However due to production problems with it the third version didn't actually hit stores until later 1982 or early 1983. Billy Joel's 52nd Street actually becomes the first CD to hit the market, on October 1, 1982.
September 5, 1982: Peter Gabriel releases his fourth studio album (titled Security in North America and Peter Gabriel IV elsewhere). When released on CD in October 1984 it becomes the first full-digital DDD release. It was recorded on Sony's Mobile One digital studio and mixed with a Sony PCM-1610.
October 1, 1982: The Nightfly by Donald Fagen is released, recorded and mixed on 3M's 32-track recorder. When the CD is issued in 1984 it becomes another early DDD release.
October 1, 1982: The first digital compact disc players are marketed by Sony (CDP-101, $900) and Philips (CD-100, $700).
The ADC converts this signal by repeatedly measuring the momentary level of the analog (audio) wave and then assigning a binary number with a given quantity of bits (word length) to each measuring point.
The frequency at which the ADC measures the level of the analog wave is called the sample rate or sampling rate.
A digital audio sample with a given word length represents the audio level at one moment.
The longer the word length the more precise the representation of the original audio wave level.
The higher the sampling rate the higher the upper audio frequency of the digitized audio signal.
The ADC outputs a sequence of digital audio samples that make up a continuous stream of 0s and 1s.
The sequence of numbers is transmitted from storage into a digital-to-analog converter (DAC), which converts the numbers back to an analog signal by sticking together the level information stored in each digital sample, thus rebuilding the original analog wave form.
This signal is amplified and transmitted to the loudspeakers or video screen.
Recording of bits
Even after getting the signal converted to bits, it is still difficult to record; the hardest part is finding a scheme that can record the bits fast enough to keep up with the signal. For example, to record two channels of audio at 44.1 kHz sample rate with a 16 bit word size, the recording software has to handle 1,411,200 bits per second.
Techniques to record to commercial media
For digital cassettes, the read/write head moves as well as the tape in order to maintain a high enough speed to keep the bits at a manageable size.
For optical disc recording technologies such as CDs or DVDs, a laser is used to burn microscopic holes into the dye layer of the medium. A weaker laser is used to read these signals. This works because the metallic substrate of the disc is reflective, and the unburned dye prevents reflection while the holes in the dye permit it, allowing digital data to be represented.
The number of possible voltage levels at the output is simply the number of levels that may be represented by the largest possible digital number (the number 2 raised to the power of the number of bits in each sample). There are no "in between" values allowed. If there are more bits in each sample the waveform is more accurately traced, because each additional bit doubles the number of possible values. The distortion is roughly the percentage that the least significant bit represents out of the average value. Distortion (as a percentage) in digital systems increases as signal levels decrease, which is the opposite of the behavior of analog systems.
The sample rate is just as important a consideration as the word size. If the sample rate is too low, the sampled signal cannot be reconstructed to the original sound signal.
To overcome aliasing, the sound signal (or other signal) must be sampled at a rate at least twice that of the highest frequency component in the signal. This is known as the Nyquist-Shannon sampling theorem.
For recording music-quality audio the following PCM sampling rates are the most common: 44.1, 48, 88.2, 96, 176.4, and 192 kHz.
When making a recording, experienced audio recording and mastering engineers will normally do a master recording at a higher sampling rate (i.e. 88.2, 96, 176.4 or 192 kHz) and then do any editing or mixing at that same higher frequency. High resolution PCM recordings have been released on DVD-Audio (also known as DVD-A), DAD (Digital Audio Disc--which utilizes the stereo PCM audio tracks of a regular DVD), DualDisc (utilizing the DVD-Audio layer), or Blu-ray (Profile 3.0 is the Blu-ray audio standard, although as of mid-2009 it is unclear whether this will ever really be used as an audio-only format). In addition it is nowadays also possible and common to release a high resolution recording directly as either an uncompressed WAV or lossless compressed FLAC file (usually at 24 bits) without down-converting it.
However, if a CD (the CD Red Book standard is 44.1 kHz 16 bit) is to be made from a recording, then doing the initial recording using a sampling rate of 44.1 kHz is obviously one approach. Another approach that is usually preferred is to use a higher sample rate and then downsample to the final format's sample rate. This is usually done as part of the mastering process. One advantage to the latter approach is that way a high resolution recording can be released, as well as a CD and/or lossy compressed file such as mp3--all from the same master recording.
Beginning in the 1980s, music that was recorded, mixed and mastered digitally was often labelled using the SPARS code to describe which processes were analog and which were digital.
One of the advantages of digital recording over analog recording is its resistance to errors.
^Peek, Hans; Bergmans, Jan; Van Haaren, Jos; Toolenaar, Frank; Stan, Sorin (2009). Origins and Successors of the Compact Disc (Philips Research Book Series, Volume 11). Springer Science+Business Media B.V. p. 10. ISBN978-1-4020-9552-8.