This article refers to the now defunct Prodigy Communications Corporation that was purchased by SBC Communications, Inc. in 2001. For information on SBC's current status, see AT&T.
Prodigy Communications Corporation (Prodigy Services Corp., Prodigy Services Co., Trintex) was an interactive service which offered its subscribers access to a broad range of networked services, including news, weather, shopping, bulletin boards, games, polls, expert columns, banking, stocks, travel, and a variety of other features. Initially subscribers using personal computers accessed the Prodigy service by means of POTS dialup or X.25 dialup. In the 1990 - 1991 timeframe, LAN and cable modem access were enabled. The company claimed it was the first consumer online service, differentiating itself from the leading service provider, CompuServe, which was used mostly by technophiles.
Early history
Prodigy had hoped that its service would be much like today's Internet portals, offering news, weather, sports, shopping for groceries or general merchandise, banking, brokerage services, and airline reservations. The service provided many lifestyle features, including popular syndicated columnists, Zagat restaurant surveys, Consumer Reports articles and test reports, games for kids and adults, in-depth original features called "Timely Topics," bulletin boards moderated by subject matter experts, and e-mail. All of this was presented with a graphical user interface based on NAPLPS and supported by proprietary programs installed on the subscriber's PC (The emphasis was on DOS, and later Microsoft Windows. Apple Macintosh was also supported, but the Prodigy screens were not always configured to the Mac standard, resulting in wasted space or cut-off graphics.). The initial business model was based on fixed, low monthly fees for unlimited use, with advertising and online shopping to generate huge profits (with few exceptions each "page" of Prodigy had the equivalent of a banner ad on it).
Under the guidance of editor Jim Bellows, Prodigy developed a fully staffed 24x7 newsroom with editors, writers and graphic artists intent on building the world's first true online medium.
Some of its shopping applications were judged as somewhat successful by the company, but others were not. Reasons for difficulty in online shopping for Prodigy included the novelty nature of online purchasing, which was new and perhaps somewhat suspect. (Though the novelty aspect of an online purchase also was the reason in favor of some sales among so-called "early adopter" consumers.) A primary reason for poor online merchandising was the nature of the graphics presented. Using the early NAPLPS graphic standard, it was not possible to render realistic images of products. So while commercial clients with presence on the Prodigy Service might have some success with an electronic order blank supporting a print catalog, it was difficult to market products. Prodigy retains the distinction of having launched ESPN's online presence and growing such firms as PC Flowers into some of the online world's earliest success stories. Still, marketers had yet to recognize the power of this new medium, so revenue from advertising was limited. Brand advertising sites on Prodigy were often seen as experimental by marketers and might be funded by research and development budgets, as opposed to media budgets. Cash flow problems forced Prodigy to increase its user fees.
Since Prodigy's business model depended on rapidly growing advertising and online shopping revenue, e-mail was developed primarily to aid shopping, not for general communication between users. However, the bulletin boards and email proved very popular--so popular that Prodigy, alarmed by increasing costs, moved to ration their use by allowing only a limited number (thirty) of e-mail messages free each month and charging twenty-five cents for each additional e-mail message. This policy was later rescinded. But in the summer of 1993, in a similar attempt to offset usage costs, it began charging hourly rates for what had become it most popular feature, its message boards. Many regular message board users did not fully appreciate what this meant until they received three-digit bills for the previous month's activity, in the place of what had been standard bills for about $20. Members began quitting the service in droves, and a downward slide began that the company was never able to halt. It later rescinded the hourly rates for message boards, but the damage had been done.
One explanation for Prodigy's slow response to a changing marketplace may be due to the conservative cultural bent of IBM and Sears, Prodigy was slow to adopt features that made its rival, AOL, so appealing -- for example, anonymous handles, online chat, and unmoderated bulletin boards. As with all services at that time, member turnover ("churn") was a major problem. Another explanation for Prodigy's downward slide may have more to do with Prodigy's original value proposition. The service was primarily built as a platform for information services, shopping and advertising, not communication. Other services focused on - or at least had available - more robust communications tools. History has shown that users found such communications tools of high value and it was not until well into the late 1990s that online shopping and similar services became more accepted in the marketplace.
Prodigy stuck with its graphical interface, its proprietary content, and its traditional policies while other services, notably AOL, embraced open standards and grew faster. In the early-1990s, the explosive growth of the Internet threatened to leave Prodigy behind, despite its high ranking in consumer satisfaction and reliability surveys (unlike AOL, which was derided for its busy signals, security issues and other problems.).
Development
In 1994 Prodigy became the first of the early-generation dialup services to offer access to the World Wide Web and to offer Web page hosting to its members. Since Prodigy was not a true internet service provider, programs that needed an Internet connection, such as Internet Explorer and Quake multiplayer, could not be used with the service. Prodigy developed its own web browser, but it lagged well behind the mainstream browsers in features. In 1995 through 1996 Prodigy unveiled several Internet related products. Access to USENET Newsgroups was made available to Prodigy members via the Prodigy interface software. And Prodigy's first web presence, called Astranet, was released shortly thereafter. Astranet was to be a web-based news and information service, possibly advertiser supported, though the site was considered experimental and had not fully worked out its offering or business model. In 1997, the company retooled itself as a true internet service provider, making its main offering Internet access branded as Prodigy Internet and de-emphasizing its antiquated interface and its own editorial content, which were rebranded as Prodigy Classic. Prodigy Classic was discontinued in November, 1999 because it was decided that for financial reasons, its aging software should not be updated for Y2K. In the end, the service had 209,000 members.
Conversion to a true ISP
In 1996, Prodigy was acquired by the former founders of Boston Technology and their new firm International Wireless, with Mexican billionaire Carlos Slim Helú, a principal owner of Telmex, as a minority investor. IBM and Sears sold their interests to this group for $200 million. It was estimated that IBM and Sears had invested more than $1 billion in the service since its founding.
Prodigy continued to operate as before, while Telmex provided Internet access under the Prodigy brand in Mexico and other parts of Latin America, with some services being provided by Prodigy Communications in the United States.
Prodigy went public in 1999, trading on the NASDAQ under the symbol PRGY. Later that year, Prodigy entered a strategic partnership with SBC Communications wherein Prodigy would provide Internet services and SBC would provide exclusive sales opportunities and network, particularly DSL, facilities. The strategic partnership also gave SBC a 43% ownership interest in Prodigy.
On November 6, 2001, SBC purchased 100% interest in Prodigy and brought it private. On November 14, 2001, SBC and Yahoo! announced the strategic alliance to create the co-branded SBC Yahoo!. Sometime thereafter, SBC ceased offering new Prodigy accounts, and customers were encouraged to migrate to the SBC Yahoo! product line, while being able to keep their {username}@Prodigy.net email addresses.
A public company
Criticisms
Prodigy was accused in late 1990 and early 1991 of spying on its users; this was one of the first online privacy scares. The evidence offered was bits and pieces of user data showing up in two files created by the software installed on subscribers' PCs: STAGE.DAT and CACHE.DAT. Prodigy contended that the data were never transmitted; in fact, their software was preallocating disk space but not zeroing it before use -- a conscious choice intended to reduce startup time on slow home computers. The unzeroed storage contained fragments of data from deleted user files. Some users claimed user data appeared even on freshly formatted disks that had Prodigy installed on them, although real evidence of this was never presented. Prodigy demonstrated to several public agencies that none of the data was ever transmitted, but rumors persisted. To quell the bad publicity, Prodigy sent users on request a floppy disk labeled "Prodigy Stage/Cache Utility Software." These contained a program to zero out the STAGE.DAT and CACHE.DAT files, eliminating the suspicious data.
Spyware-like behavior
Being the forerunner in this new medium, there was little case law and Prodigy was also the leader in litigation and censorship claims. While some claimed that Prodigy was an editorial entity such as a newspaper or radio station whose content was subject to legal statutes such as defamation, slander and the like, Prodigy argued that it was a communications entity such as a telephone company whose "content" (i.e. telephone conversations) they were not responsible for. They were simply the medium across which these communications occurred.
Claims of censorship included users of public forums who were forbidden to mention other users by name. The most infamous example of this was a coin collector's message, banned because it contained the phrase "Roosevelt dime" - there was, as it happened, a Prodigy subscriber named "Roosevelt Dime." A wildlife discussion group found that the word "beaver" was forbidden; they had to call the animal by its scientific name. Moderators on boards dedicated to computer games would delete posts based on the games' storylines rather than gameplay. Criticisms of the Prodigy service in its public forums were often deleted. Users tried to work around Prodigy's various strictures. For instance, to beat the thirty-message email limit, some users set up "undergrounds" -- shared accounts where they communicated by sending messages back to the same account. When they became popular, even typing the abbreviation "UG" (Under/Ground) could get a message automatically deleted.
Pioneering and unusual aspects
Prodigy was frequently hurt by poor management decisions. Those in charge failed to understand the developing medium, giving at least the impression of disdaining users' wishes, constraining usage rather than catering to it. For example, when subscribers used more connect time on email or message boards, Prodigy discouraged such usage by changing fee structures. Many subscribers quit rather than live with these constraints, especially as alternatives appeared in the form of rival providers. The Prodigy Communities were starved of resources and became insignificant against the vast background of the World Wide Web.
While the strategic partnership with SBC provided a significant infusion of cash and customers, the intended migration of SBC Internet Services customers to Prodigy took longer than expected.
Downfall
Current status
By 1994, Prodigy became a pioneer in selling "dial-up" connections to the Web, the graphical interface for the Internet, and sold hosting services for Web publishers.
In 1999 the company, now led by a cadre of ex-MCI executives with the goal of turning the brand around, became Prodigy Internet, marketing a full range of services, applications and content, including dial-up and DSL for consumers and small businesses, instant messaging, e-mail, and communities.
In 2000, with subscriber growth exploding and brand attributes at an all time high, Prodigy explored a number of partnership deals including what would have been an unprecdented three-way merger between Earthlink, Mindspring, and the company. Ultimately, SBC bought a 43% interest in the company, and Prodigy became the exclusive provider to SBC's 77 million high-speed Internet customers. More than a year later after the launch of Prodigy Broadband (conceived and led by Chris Spanos), SBC bought controlling interest for $465 million when Prodigy was the fourth-largest Internet service provider behind America Online, Microsoft's MSN, and EarthLink. Prodigy in 2000 was reported to have 3.1 million subscribers of its own, of which 1.3 million were DSL customers.
AT&T no longer actively markets Prodigy services. However, a fair number of customers still use the Prodigy services that were available at the time of the acquisition.
Attempts by SBC to sell the Prodigy brand became public knowledge on December 9, 2005. [1] The brand hasn't been sold yet.
In late 2006, SBC purchased AT&T and re-branded itself as AT&T. As of early 2007, there remained within AT&T's Internet operations a small group of former Prodigy employees located in AT&T's Austin, Texas and White Plains, NY facilities. What had started 27 years earlier as an AT&T online experiment had come full circle.
In MexicoAT&T Yahoo! - formerly SBC Yahoo!
Stratton Oakmont, Inc. v. Prodigy Services Co.
