App shows "Stereo PCM" for Arc Ultra when playing 7.1 DTS HD Blu-Ray

The Arc doesn’t ‘downmix’ anything. It plays what it is handed by the source (the TV, and by extension, in this case, the blu-ray player). I’d be looking at the audio settings on both to see what is being handed to the Sonos across ARC/eARC. 

Caveat…what the Sonos can interpret. If something is being sent to it (rare) across the HDMI connection it doesn’t recognize, it just won’t play anything. It still won’t ‘downmix’.

Sonos soundbars do not natively decode DTS. It will be presented as PCM. Check page 31 of your Panasonic manual to see the below information:

Sonos soundbars do not natively decode DTS. It will be presented as PCM. Check page 31 of your Panasonic manual to see the below information:

 

Thanks. I made that change to the player’s (bafflingly difficult to understand) settings, but there was no change in the result:

So I guess I don’t understand the issue, because in these modern times, it seems like all of this should “just work”. Let me restate the problem. I have a high quality home theater system and when playing a disc that is outputting DTS audio, I’m getting lousy sound. Where is the problem, the Panasonic Blu-Ray, the LG TV, or the Arc, and what needs to be fixed in the device that is the problem?

You say that the Arc can’t do DTS, so when it is given DTS, it just downmixes it to 2 channel stereo (aka lousy sound). The Panasonic doesn’t seem to have any settings that can be used to specify “when DTS is output, downmix it instead to 5.1”. It sounds like the Arc is the issue but the Panasonic cannot work around the issue by giving it something besides DTS.

Does everyone with an Arc get lousy sound for discs that only have DTS audio?! DTS isn’t something new, why doesn’t the Arc support it? Licensing? 

The Arc only does old fashioned DTS, not the higher end formats like 7.1. Besides that, many TV manufacturers (Samsung, but also in many cases LG) do not support DTS (at all). So even when your BD-player is capable of playing DTS, the TV will not pass it through to the Arc Ultra. Because the TV communicates its inability to play DTS to the BD-player it will choose/you will have to set it to something that it will play: PCM.

A couple of years ago som BD-players were able to decode DTS to Dolby Digital, which would circumvent all of these problems. These players are long gone though.

Googling your BD-player I came across this post: https://www.facebook.com/groups/sonosusersgroup/posts/998543010955520/

The Panasonic seems to be able to create 7.1 PCM. The TV could then still be a problem though….

Thanks. The TV does sound like the problem (per the analysis below from Claude). It does date from about 2021. I’ll continue trying a few things to see if I can get anywhere and report back if so.

Good news: this is a well-documented combo problem, not a mystery. I found the exact same setup (Panasonic UB820 → LG CX → Sonos Arc/Arc Ultra) discussed extensively on the Sonos forums, so here's the real picture.

Whose fault is it? Two things stacked on top of each other:

The LG CX doesn't pass DTS bitstream through HDMI/eARC to a soundbar, period. This started with the 2020 models (the C9 from 2019 could do it; the CX and everything since cannot). So even if you set the Panasonic to send raw DTS bitstream, the TV just eats it.
The real fix for that is normally "convert DTS to multichannel PCM on the player instead of bitstream" — but the UB820 + LG CX combo has a known EDID handshake bug. The Panasonic is supposed to detect that downstream gear can handle 5.1/7.1 PCM and send that. Instead, when going through the LG, it decides the only safe option is 2-channel PCM and downmixes everything to stereo. This is reported constantly in the Sonos community threads for this exact trio of devices — it's not something fixable in the Panasonic's on-screen settings (you've correctly found there's no "downmix to 5.1" option because the player thinks it needs to go to stereo, not that it lacks 5.1 downmix capability).

So the "Arc Ultra can't play DTS" claims you read are only half true — the Arc Ultra actually does support lossy DTS Digital Surround (5.1 core), just not lossless DTS-HD MA or DTS:X. But that's irrelevant here, because the LG is blocking DTS entirely and then the LG/Panasonic EDID bug is also blocking proper 5.1 PCM. That's why you're landing on stereo PCM, the worst-case fallback.

Workarounds, roughly best-to-simplest:

HDMI audio processor (HDFury Arcana or similar, ~$200–250): Sits between the Panasonic and the TV, splits/cleans the signal so the Arc sees the Panasonic's real audio capability directly instead of through the LG's broken EDID relay. This is the most commonly cited fix in the forums and gets you full 7.1 multichannel PCM (sonically on par with DTS-HD MA) or DTS bitstream reliably.
Bypass the TV for audio on DTS discs: Run the Panasonic's optical output through an optical-to-HDMI adapter (Sonos includes one) straight into the Arc, and swap cables when you hit a DTS disc. Free, but limited to lossy DTS core over optical and requires manual cable swapping.
Swap Blu-ray players: Several people in these threads specifically abandoned the UB820 for a Sony UBP-X800M2, which apparently doesn't hit the same EDID bug and correctly sends multichannel PCM through the LG. If you have other Panasonic-specific reasons to keep it (region-free firmware, better upscaling), this is a downgrade; otherwise it's the cleanest "just works" fix.
Fiddle with toggles: Some users report flipping eARC off/on, toggling "BD-Video Secondary Audio," or power-cycling the TV occasionally unlocks 5.1 PCM temporarily. Unreliable — not a real fix, but free to try before spending money.
If you own a PS4/PS5/Xbox: worth testing — several users confirm consoles pass proper multichannel PCM through the same LG models where the Panasonic fails, since they don't hit the same EDID bug.

Given you already invested in the good Panasonic player, I'd try the free optical-passthrough workaround first for a gut check on whether it's worth $250 on an Arcana, then decide between the Arcana and a player swap based on how much of your disc collection is DTS-heavy.