Yes set to digital. Its a good feature as well as the tone controls since even some SACDs can be a tad bright. Dont understand why they dont advertise it nor mention it in the manual as very few manufacturers offer this much flexibility. This 970+7125 combo is amazing and ALMOST perfect - The DVI over HDMI choice and the lack of a learning remote being the only two sins of omission. Outlaw not being mainstram should offer a learning remote as an upgrade option or for sale separately as their command codes are not available on generic universal remotes.