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Soundwaves are relatively easy to convert between analogue and digital signals. For example, a microphone consists of a capsule that moves in response to incoming soundwaves, generating an electrical signal whose amplitude (a fluctuating voltage) corresponds to the amplitude of the soundwave.
In digital audio we represent this electrical signal as a stream of numbers that computers understand. An analogue to digital (AD) converter takes a ‘sample’ of the voltage that’s present at its input and represents that as a specific number; the higher the voltage, the higher the number.
The accuracy of your AD converter has a big impact on the quality of your digital recordings: if you’re buying a new soundcard or AD converter you should examine the stability of their clocks (see Clocking), the quality of their preamps, quantisation error (see Dither) and the total harmonic distortion introduced in the process.
The preamps in a soundcard increase the incoming signal to a level that’s suitable for both the AD converters and the source material, keeping it within an acceptable range of amplitudes (see Headroom). Cheap preamps can introduce noise and colouration to the conversion process.
Digital to analogue (DA) converters reverse this process by converting the numbers back to an electrical signal that can be heard through monitors. Once again, the quality of these converters is important: icheaper soundcards tend to be noisy with poor stereo imaging; better ones don't leave their own fingerprint, but simply convert the audio accurately.
It’s widely considered that Apogee soundcards are exceptional, as are Prism. Avid ProTools HD rigs are highly respected too. At the other end of the price range, Presonus’ VSL range produce very good results for the money. As with everything in life, you get what you pay for.