The requirements for a digital audio system to be used for broadcast, cable, and satellite delivery media differ from those for recording in that the major economic consideration is the cost of the playback circuitry. This fact has been utilized in the digital audio system to be described. The system offers high quality sound at a relatively low data rate (on the order of 200-350 k bits/sec) and the option of audio scrambling. No precision components are required in the decoder minimizing cost. The performance, cost and data rate advantages are achieved by placing more sophisticated circuitry in the encoder. Applications being pursued include DBS, cable, pay-TV, and terrestrial broadcast systems.