It can also direct play a lot of formats too though, because Apple TV boxes since the 2017 4K model have enough muscle for problem free software decoding.
Most audio streams are 'direct stream' when you use plex/jf/emby as backend, but your receiver/soundbar only gets the PCM stream, without any object data (yes, you loose atmos, not that it is a lot of loss when using a soundbar, but if you have atmos speakers in your ceiling you want that data)
in an ideal world, the appletv will simply passthrough the audio upstream, so you receiver can do what it does best.