Mark a level line 12 inches below the ceiling using a tape measure and a spirit level. Screw 1-by-3-inch furring strips in place so the bottom edges are even with the 12-inch mark.
Determine the location of the ceiling joists, which are typically 16 or 24 inches apart, with an electronic stud finder and lightly mark both sides of each joist with a pencil. Mark the ceiling 24 inches from the wall in the center of each joist. Fasten 2-by-4s in place with wood screws into the ceiling joists so that the edge of the 2-by-4 falls on the mark 24 inches from the wall. The 2-by-4s and furring strips create a soffit that will measure on its internal dimensions 12 inches deep by 24 inches long.
Create an upside-down T-shape with two 12-inch pieces of 2-by-4, with a butt joint holding the bottom of one piece to the center of the other. Add a 6-inch-long piece of 2-by-4 at one end of the T, pointing up. This creates a channel or recessed area where you can hide a rope light to project up on the ceiling from below, like an old-time movie theater.
Install one upside-down T at each ceiling joist on the outside of the ceiling 2-by-4 with wood screws so that the rope-light channel faces outward toward the center of the room. Finish all four walls in this fashion. Run wiring and cables and install speakers behind the soffit Ts.
Place 24-inch-wide, cotton bass-absorbing material in the soffit around the wiring and speakers. Close off the front and bottom of the soffits with acoustic paneling. Glue impaling clips for the panels with construction adhesive and screw them to the soffits. Glue the acoustic panels in place with construction adhesive and press them against the clips.