ARC only works if both devices are ARC capable. Otherwise, ARC capable inputs work just like any other HDMI input, with the audio being sent in one direction only. The only real advantage of ARC is to eliminate the need to use an optical cable. Typically, tv's don't have the ability to decode because they are basically stereo devices. If you have a SmartTV, the smart apps will output 5.1 if the particular app is designed to do that. Not all smart apps will output 5.1. But to do that, you usually have to use an optical cable from your tv to the avr and choose that input on the avr.