Subgroups are a way to "pre-mix" a number of channels on a sound console before sending them to the master output mix. In the following diagram, channels 1 and 2 are assigned directly to the master output bus. Channels 3, 4, 5 and 6 are assigned to subgroup 1, which in turn is assigned to the master output.
Subgroups have many uses and advantages, the most obvious being that you can pre-mix (sub-mix) groups of inputs.
For example, if you have six backing vocalists you can set up a good mix just for them, balancing each voice to get a nice overall effect. If you then send all six channels to one subgroup, you can adjust all backing vocals with a single subgroup slider while still maintaining the balance between the individual voices.
Note that if your mixing console's subgroups are mono, you will need to use them in pairs to maintain a stereo effect. For each pair, one subgroup is the left channel and the other is right. Each channel can be panned across the two subgroups, while the subgroups are panned completely left and right into the master output bus.
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