Atmos support

If the game does not support Dolby Atmos, then the audio is normal stereo. Microsoft are working on updating Dolby Atmos, where if the game does not support Dolby, the audio will be converted to simulate Dolby Atmos.

Dolby Atmos and Atmos for headphones are two different things. Netflix does not support Atmos for headphones as far as I am aware

Does xbox console really support atmos?

Does game studio published with atmos?

https://images-na.ssl-images-amazon.com/images/I/D12isMWJ+fS.pdf - The Manual

HDMI ARC Does not support Dolby Atmos or DTS:X. They really have to mention that more. The only way to get Dolby Atmos is from a direct connection with something like a Blu-ray player or your computer. If it goes through a tv, it won't support Dolby Atmos.
The manual, use CTRL + F and type atmos to find it, lists what you get with a connection.

HDMI Direct Connection | HDMI ARC
| Optical |

LPCM 2.0 | Yes | Yes | Yes |

LPCM 5.1 | Yes | No | No |

LPCM 7.1 | Yes | No | No |

Dolby Digital | Yes | Yes | Yes |

Dolby TrueHD | Yes | No | No |

Dolby Digital+ | Yes | Yes | No |

Dolby Atmos | Yes |Refer Below| No |

DTS-HD HRA | Yes | No | No |

DTS-HD MA, DTS LBR, DTS: X, and DSD are HDMI Direct Connection only.

Ok, as to why I said refer below for Dolby Atmos on ARC is that there is a difference between Dolby Atmos. So you can encode atmos into either TrueHD or EAC3. If something doesn't support atmos, the system falls back to either TrueHD or EAC3. (TrueHD is
most common in files. HDMI ARC does not support TrueHD + Atmos combo. However, some TVs can support EAC3 + Atmos. So for most files, you'll have TrueHD + Atmos. HDMI ARC will not support TrueHD or Atmos. However, some TVs can support EAC3 + Atmos. However,
you will rarely find this. Your best bet is to directly plug something like your graphics card (atmos must be supported), Blu-ray player or anything that can output Atmos. HDMI ARC is soo confusing to deal with and that's why many people just assume that it
can support atmos. I've heard new software is coming out that may support atmos on arc though.

Explanation:

Dolby Atmos for Blu-ray & Basically everything else - Direct Connection - NO ARC

Dolby Atmos for streaming (Netflix, Amazon Video) - HDMI ARC is okay!

Conclusion: HDMI ARC is limited right now. You should use a direct connection if you want to fully experience atmos on your programs.

Edit: Steaming sites like netflix use DD+ which is EAC3 + Atmos. So you can use HDMI ARC and watch netflix with atmos but... that's pretty limited.

Hi There

With you purchasing the soundbar that supports Atmos, the hardware will tell the console that it is supported (and you ahve changed your output method to Bitstream out, for the soundbar)

As for the Headsets, Dolby requires that you purchase the Atmos app to enable atmos on the headset.