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Headroom is a term used in signal processing referring to the maximum allowable signal level before compression or distortion.
In an audio system headroom is the amount by which the maximum permitted level, or digital FS (full scale) exceeds the alignment level, in dB (decibels). Alignment level is an 'anchor' point, a reference level that exists throughout the system or broadcast chain, though it may have different actual voltage levels at different points. Typically though, alignment level is +4 dBu at analog points in a professional audio chain, or 0 dBu in a broadcast audio chain, and −18 dB FS at digital points, corresponding to 18 dB of headroom, the EBU recommended figure for digital recordings. An alternative EBU recommendation allows 24 dB of headroom, which might be used for 24-bit master recordings, where it is useful to allow more room for unexpected peaks during the live recording process.
Failure to provide adequate headroom is a common problem with CD's published in the late 1990s and early 2000s which often use heavy level compression (not to be confused with data compression by codecs such as MP3), producing a very flat 'mushy' sound that lacks the sparkle provided by brief peaks from percussion sounds. See Loudness war.