Joshl...Logic assisted matrix decoders were around before digital. Sure, it can be all analog.
However, there are some real advantages to doing the job in the digital domain. Most important, the signal that you are listening to can be delayed slightly so as to give the logic time to figure out how gains should be adjusted for the signal. With analog processing the logic is always just a little bit behind the action, and this can lead to "pumping". Some analog processors were much better than others in this regard. Also, if your signal comes from a CD player it is digital already, so it makes sense to process it digitally.
However, there are some real advantages to doing the job in the digital domain. Most important, the signal that you are listening to can be delayed slightly so as to give the logic time to figure out how gains should be adjusted for the signal. With analog processing the logic is always just a little bit behind the action, and this can lead to "pumping". Some analog processors were much better than others in this regard. Also, if your signal comes from a CD player it is digital already, so it makes sense to process it digitally.