Orb Wants to Free Digital Content

(page 2 of 2)

British Pioneer

But Orb has a long road ahead. It needs far more users if it is to survive, and that means getting partners to help make its software mainstream. Three Group, a subsidiary of Hong Kong-based Hutchison Whampoa (HUWHY), is bundling Orb's software in a pricey new mobile broadband service, called X-Series, that was introduced in Britain on Nov. 19. Now British subscribers can tap into their home PC via Orb.

Costello says Orb also is in talks with manufacturers to use Orb's software in devices such as set-top boxes and so-called digital media adapters now used to link the PC to the TV. Three companies have signed up, but Costello will only identify one: Cambridge (England)-based Amino Technologies, which sells set-top boxes through small phone companies.

In early 2007, Amino will use Orb software to roll out a new offering called AminoTV that will let consumers access free video clips, buy movies from sites such as MovieLink, or use online gambling and videoconferencing applications.

Marketing Gimmick

Over time, Costello hopes to drive industry standards for various levels of devices. Low-end devices costing less than $50 would provide the basic ability to see PC content on the TV, while higher-end models would be bidirectional, so TV content could be viewed on PCs and other browser-equipped devices. To help generate buzz, Orb has even created prototypes of a green, orb-shaped gizmo that looks like a glowing crystal ball, though Costello concedes this is more of a marketing gimmick than a design anyone would mass produce.

Still, Costello's big dreams are in sharp contrast to Orb's current reality. So far the company has had to give away its technology to attract the 500,000 people who have downloaded its software (Costello claims 400,000 of them are active users). Other than a small cut of revenues from subscriptions offered by partners such as Three Group, it has no income stream. As a result, it will book a puny $1 million in revenue this year.

Costello says Orb could one day offer a monthly subscription of its own, if it can develop a critical mass of users. While it has raised $12 million in venture financing to date, Costello hopes to raise as much as $30 million in 2007 to finance Orb's big plans.

Where's the Profit?

But like so many Net startups, Orb is relying mostly on the prospect of advertising revenue. So far, Orb users see and hear no ads. But in the future, since users pick and choose precisely what content to include on their Orb portals, Costello says Orb is positioned to give them only ads they really want. Orb has run a trial with Ticketmaster, in which fans who repeatedly played certain artists were shown banner-style ads notifying them of the act's next local concert. Costello hopes to start an advertising push in the second half of the year.

While Orb's technology has impressed some analysts, the company's business model has others doubting it can make it as an independent company. Gartner analyst Mike McGuire wonders whether its ambitions are so broad that its message is hard for regular consumers to understand. "Orb's ability to make content portable is really cool, but is the mass consumer really asking for it?" says McGuire. "I don't know how they make money."

Costello insists Orb is onto something big and says he's intent on pushing forward despite the long odds. He claims Apple is the only company that is truly revolutionizing the way people use digital technology to be entertained. So long as that's the case, he's convinced there's room for other visionaries. "Steve Jobs is doing a fabulous job, and I'm not taking anything away from him," says the 6-foot, 7-inch Costello. "But I'm sure I'd be a star basketball player in the Pygmy league."

Burrows is a senior writer for BusinessWeek, based in Silicon Valley.