TechStuff Classic: The Prodigy Story

Ages ago, Chris and I did an episode about online service providers, but this time we want to specifically look at Prodigy, partly because it was one of the earliest, in fact, depending upon whom you ask, the earliest online service provider. Now, online service providers are different from Internet service providers. So I'm gonna blow your minds out there, kids. So you young uns out there, there was a time when we did not all have access to the internet.

It was a terrifying time. Dinosaurs roamed the earth. Occasionally you would go camping and an enormous guy in a hockey mask would chase you around. The eighties were tough, y'all. I actually do remember that time, dimly. I mean I I was, you know, not necessarily eating all solid food yet, and I could barely read. But I do, in fact for call a time before the internet. I grew up in that time, and uh, I bear the scars to

this day. Also, I don't read that much currently. But at any rate, now we're talking about a time where the computer revolution had really taken hold of. The personal computers had already become a rising trend. It still was kind of a rarity to find someone who owned a

personal computer. It wasn't like there were PCs everywhere, certainly not, but they were certainly getting very popular in the mid eighties, and more and more people were adopting them as the price was becoming more affordable for the average household rather than for hobbyists only. Right, right, So those those bleeding edge technology adopters who somehow have the jobs that allow them to to indulge their obsession with technology, they had already gone through the first wave, and now it was

trickling down to everybody else. All right, we're talking about the kind of the two eight six sort of days is where Prodigy started kicking out. So during those times, your computers, you know, the early early computers were really, especially for personal computers, were just self contained devices. Right. It was whatever software you had to run on that machine, and that was pretty much it, which you would put on the machine with fancy fancy uh five and a

quarter inch floppy disk. Yeah. Yeah, you wouldn't necessarily even have a hard drive. You might just run it directly from the discs. So, in other words, once that disc was popped out, that was it. You didn't have program, You just had your basic operating system, although you might not even call it that um anyway. Eventually you started seeing things like modems where you could do things like

connect to a local bulletin board system or bbs. This was usually something that was hyper local, as in something that would might be running the same city that you live in, because in order to connect to most bbs is, you had to dial a specific number, and usually it was a it was a local number, yeah, because you could dial into a BBS that's run in a state, you know, twenty states away. But long distance charges at the time were also such that that that it would

have been incredibly cost prohibited. Yeah, anyone, any kid who experimented with connecting to bbs is might find out rapidly from his parents or her parents that uh, it was not the best idea to do that without parental agreement beforehand, because you could rack up huge bills. I mean, this is the era where long distance charges were a real thing. I know that a lot of people today aren't even that's not something they even think about because in most

cases you don't have a long distance charge anymore. About once a month, I marvel at the incredible present and the fact that I can call people all over the country without having any without worrying about, oh, you know, we've taught for five minutes, this is gonna cost me twenty bucks or whatever. Uh and and they have not said anything of value, so so at any rate, at

this time, that was pretty much it. And then there became this idea of the online service provider away for companies to create services that would open up brand new

opportunities for consumers. And it was before the Internet had rolled out to being something that the general public could access, so be sure, but but you know, people were looking for a way to provide service to you know, to a consumers who wanted to communicate and be two companies who wanted to sell more stuff, give give companies an

outlet to sell more stuff. Right, So so this was this was the idea, like instead of instead of the Internet, think of the Internet, it's it's the network of networks, right, It's all these different computers. They're connected together, and lots of different types of communication goes across the Internet, from email to file transfers to web traffic. All of that stuff is going on across the Internet. An online service provider is more like a very small network. It's not

a network of networks. It is a network in which you use your computer to dial into a host computer, and the host computer serves up all the information on it that it has. So, in other words, instead of having access to everything in the world, you just have access to whatever the host computer has on it. Uh and online service providers did this in different ways. So let's talk specifically about Prodigy. To talk about how it came to be, you have to look back at nine four.

That's when a couple of tiny companies IBM was one of them, uh Sears was another, and CBS was a third, formed a joint venture they called trend texs Now, this trend Text venture was specifically meant to provide something called video text services, And you might all wonder what the heck video text is because it's not a term that you see today really, But this was a technology that

would allow you to connect a terminal. So it could be a computer, or it could just be a very specific terminal made for this purpose, or even a television with special yea. Yeah, so you have one of these things that connect to a phone line and then can call into a centralized computer to get content that way. Now, the this is sort of a predecessor to the kind of modems that we would see uh later on, although at this time in the in the early eighties, a

modem was something that very few people had. It was certainly something that was used in commerce shell purposes. You had companies using it like IBM certainly had plenty of modems, but your average computer owner did not have a modem at this time. They certainly they also were not part of a standard computer like there was a time where you would get an internal modem like a dial up modem, and you would just plug a phone cord into the back of your computer and from that to the outlet

in your wall. Before that, you had external modems that would connect to a port in your computer and then you would connect your telephone connection to the external modem. That's the kind I had, of course, yeah, I I do also want to mention this is the same year that um IBM introduced the portable PC weighing a mirror thirty pounds or what's that like fourteen kilos, Yeah, something like that. So you're talking about portable depending upon your upper body string. Uh So, so that was that was

kind of the life of the times. UM the entire video text thing was doing a little bit better in Europe. There were a bunch of countries that already had something like this, but it was really the first time this whole trend text thing was really the first time that had been rolled out for commercial use for customer use

for the United States and the US. Yeah. In fact, the the concentration in Europe would mean that uh, companies like Prodigy in America Online would end up sort of foregoing any kind of penetration attempts in Europe because it was already substated. UM and CBS had did a did a trial of video texts in a three with a T and T in about two households somewhere in New Jersey just to see how much interest there would be, and there was a lot. So that is why CBS

was involved. Sears was you know, if you're saying why was Sears and Roebuck involved in this internet a venture, it's because Sears had the complex billing system and the customer base like the mail order customer base. Sure. Yeah, the Sears catalog is like a legacy right to retail. Not only that, but Sears itself has had a long history in being involved in electronics. In fact, for a while, if you wanted to buy a computer that you would either go to a very specialized computer store or you

would go to a Sears would buy your computer there. Yeah. And IBM actually in contemporary literature people were talking about IBM being the most surprising company of the three, which doesn't make any sense to me. But but but their reasoning behind calling it that was that they had been really only hardware with a tiny bit of software involved up until then, and so now they're trying to create an infrastructure that would essentially be a lot of software. So

nine four, this partnership is founded. But it wasn't all smooth sailing. They did some you know, some pilot testing and and in general, it just looked like it wasn't really catch gun. It might have been ahead of its time in the United States, or may have just been the execution that didn't match people's expectations. At any rate, it didn't get adopted as quickly as all three parties were hoping. And one of those three parties, CBS, decided to say see you later, alligators and drop out of

the partnership. Yeah, that was in That was a six, did you say, Yeah? And so then a eight um series and IBM decided to stick with it. They doubled down. Yeah, they invested four and fifty million in startup. Yeah, so which is that was an eight? So if we are just for inflation, that's what eight hundred and sixty million. That's a lot of money. That's so many dollars. Yeah, so huge, huge investment here. And that's when they actually

created the company that's called Prodigy Services Company. Now, don't get too used to that name, because one of the things we can talk about with Prodigy, and we will talk about is the fact that their name changes every few years. Yeah, it usually retains the term Prodigy. That's

about it. But that's it. Yeah. So Prodigy Services Company is formed to oversee the trend texts uh technology, and by June of the entire project changed its name to Prodigy, So I mean they no longer talked about Trient Tech. Trent text was a thing of the past. It was now rolled into Prodigy and that launched in eight and it became the world's first consumer based online service provider. Now,

at the time, IBM had made an estimate. They looked at all the households in the United States and they estimated how many households out there would have computers that would actually be sophisticated enough to run the Prodigy software. And when I say sophisticated enough, it's not that the project software was this mind bending, amazing looking uh software. You it was a visual interface, which was which was a new thing. It was a huge improvement over local bbs.

Is that we're all text based, right, so there were there were graphics involved, but they were very simple graphics. And uh, we'll try to effect. Lauren found a great commercial just before the podcast that she shared with us, so we'll we'll try and put that up on the Facebook page and link it to Twitter as well, so that you guys can see what Prodigy look like when it launched, because the commercial actually comes from this era. Yeah,

but you know, six machines were just coming out. They had several megs of RAM, which was big and new and and three point five inch floppies were blowing people's minds, right. Yeah. And so IBM looks at all these households, says, five million homes and the entire United States are probably capable of running Prodigy software. They probably have computers that can do this. So five million, that's our target audience. We want to hit those five million folks. Um. Yeah, that

was that turned out to be an ambitious target. In fact, five million ends up being ambitious spoiler alert through the entire life of Prodigy. Um yeah, but we'll we'll get into that as we go further. So, the first cities that received the service were San Francisco, There was Hartford, Connecticut, and there was some other city, Atlantaza. For once Atlanta gets something first. Um yeah, it ended along with technological innovator Hartford, Connecticut. I well, you know, I don't make

fun of heart for Connecticut. Those people will scold you at any rate. Yeah. So Atlanta, San Francisco, and Hartford are the three cities that get it first, And I honestly don't know why those three cities were the ones chosen. Perhaps that the telecommunications infrastructure was just uh the best in those three for for the services of Prodigy. But so the startup package for getting this service was a little bit complex because, like Jonathan was saying earlier, people

didn't have modems. They certainly didn't come in computers at the time. Um, it was an add on sort of thing. So the original kit cost at nine dollars and cents to include that that motive, the software, and three months of initial service. Three months of service yeah. Um, you could also hypothetically if you happened to have a modem by just software for right, and then how much was service per month with with a yearly subscription it was a month and a month to month it was twelve.

So there you go nine dollars per month if you if you sign up for a full year, or twelve ninety five per month if you were going month to month basis uh and uh. And so they figured that with that pricing, with that subscription model, if they got enough people to subscribe, that would be an ongoing source

of revenue. Right, it's the same sort of model that we see with things like pay to play um M M O RPGs you know which now when now we're seeing more and more of those move away from that model and go to free to play and then pay to access certain types of content. So nonetheless, the month to month subscription fee was a change up at the time I think that any anyone else who was in the business, and maybe because maybe a O L was starting at the same it was starting around the same time.

Yet and most other services that would be beginning around that time, we're using UM pay per usage like per per the minute or per per hour the data set. Right, You didn't have you didn't have that many people offering or that many companies I should say, offering a monthly

fee for their service. It was almost always uh you know, maybe you get the first half hour of content at one amount, and then above that it would be more because another limitation on some of these early online service providers was that they only had so many UH connections that they can make at a single time within a particular region. So if you if you have a phone number that you're supposed to call with your computer, it may be that the computer can handle, say one connections,

and beyond that, it can't handle more than that. And so so allowing people continual access was potentially dangerous to your customer base because you know, because everyone say like, well I got your software, but I can never connect. So it's just busy signals for years, right right, So but now bigger companies, the next generation is never going to have those Yeah, sorry, okay anyway, but yeah, so the larger companies at this time could actually handle lots

of phone calls your local BBS is. I mean, I remember this era where I would call into a local BBS and there would be maybe five lines, and if you called when those five lines were in operation, you just had to wait and try and call again, like in the half hour or an hour, or every ten seconds if you were someone like me. But at any rate, that's you know, this was this was a step up above those local bbs is a big step up, not just a tiny little incremental step. But but Prodigy was

in fact still regionally operated. It's I mean, they were advertising in lots of other cities that they were planning on expanding out to. Yeah, in fact, there was a pretty extensive advertising campaign, including that fantastic commercial you showed me before the episode, Lawrence, Well that one is from all the way in clearly. Wow, so we're talking Prodigy story is so different. But yeah, no, it's they were really trying to drive adoption of this because it was

a brand new thing. You know. This is like I said, this is before people for the most part, had ending knowledge whatsoever of the Internet. You know, anyone who knew about the Internet was working on the Internet, like building

the Internet. And so yeah, so talking to people about you know, posting to bbs is or doing online shopping or anything like that, or you know, looking at stocks or weather online, people were like say, one, yeah, yea, this is my computer, the thing that I used to play a game on and occasionally try and create a little program that says hello world. Um yeah, it's it was a big change, a huge change as far as computer use goes. It was really opening up the gates

to the potential for computers. And then on top of that we then saw by the end of eight so all of this is happening at eight eight, this is a huge year for Prodigy, right, it's their launch year. By the end of eighty eight, they have extended their service to three more cities particularly Actually, I think it's for cities. I just wrote down three, but their cities in California, and those included Los Angeles, San Diego, Sacramento, and I think Santa Barbara was also one. I just

didn't write it in my notes. Uh. And so you had this, this this cool system, arguably cool. I guess for me it was cool. I was an early Prodigy user because I live in Atlanta. Uh. And they did have their rivals, not just what would become American America Online, not American but America Online, but also compu Serve, mind Spring, earth Link. These are all they came on the scene at different times, but they would all become rivals. Now.

The way this would work, generally speaking, is that when you would use your computer to call into whatever computer was in charge of your region, that computer could then serve up all the information that was available on it. And we'll talk more about the kind of services that Prodigy offered towards the end of the podcast, but this also includes you know, pretty basic stuff like news items, financial stuff, bulletin boards where you can actually leave messages

and retrieve messages. There was even an email, although originally that email would only allow you to send messages to other people on the Prodigy service um and you could get all that information. But although early ads talked about it being updated throughout the day, originally the way these services worked is that the the regional computer would connect back to headquarters to a master computer once a day, once a day, now once every twenty four hours, they

would get new content. So then that way, when you log on the next day, you would get new news articles, new financial reports, that kind of thing. But it would stay like that all day long. It wouldn't get updated throughout the day because again, these were all general computers that were only intermittently connecting with a master computer. It wasn't like a truly integrated network at this point. So this was definitely a different kind of approach than what

we see today. By eighty nine, the estimate that IBM had made had increased. No longer did they think that there were five million homes out there that could run Prodigy software. Now they believed there were nine million homes. So that shows that the adoption of the personal computer, and not just personal computers but more sophisticated personal computers was on the rise. Uh. This still is before the

true explosion in personal computers. I mean there was a time I think we even mentioned it in one of our podcasts where Bill Gates had kind of projected out how many computers he thought were going to be adopted, and it turned out it was like a seventy fewer than what actually happened, and now no one could predict it. Um. The actual number of Prodigy customers at the time was Yeah. So they remember, they're aiming for a customer bay that they have estimated to be nine million people, and they

they land sixty thousand. That is brutal. I mean, that's such a tiny percentage um. And then Prodigy launched in New York City, but it only had partial coverage in in the city. They had the thirteen markets in New York City, but that meant that they had left out about the population of New York City who had the who had the technology to connect right, They had the ability, but they didn't have the actual support, so they could not be members of Prodigy at that time, so they

weren't able to capitalize on that very at least not efficiently. However, by Prodigy did become available across the United States, I believe when I got Prodigy up near Cleveland, Dish. Yeah, see, I was already living not in Atlanta, but close enough to Atlanta where I got the support, and by the end of that year, their numbers had exploded almost tenfold. Really, we're talking from six thd to six hundred thirty five thousand.

So but now granted they managed to go nationwide. Now, so now you're talking about the entire US, not just these little regions that they had been hitting previously, but still only six thousand, and that put them in second place. The first place provider was compu serve Um, which we could also do an episode about copy serve at some point. But compu Serve would eventually be acquired from H and R Block, which at the time they were there the

owners at the time. The new owners would be America Online, and of course America Online UH ends up being the big daddy of the online service providers and probably made I would say, I would argue that it made the most effective transition from online service provider to internet service provider. The two things are different. Yeah, I've seen estimates, by the way, that about twenty five million households now held computers. Wow.

So yeah, huge numbers that are jumping up here. Right, We went from five million to nine million, and nine million to five million, So and you might be wondering, like, how how is this even happening? This is Moore's law in play, right. Moore's law is not just about how computers get twice as powerful every two years or so. It's also about how, because the processes get more sophisticated over time, the technology itself decreases in price and cost

so more people can afford it. So not only are they becoming more powerful, they're becoming more affordable, so you're seeing higher adoption rates. This in particular way that was a giant boom time. Yeah, yeah, this is and and you know this is also ten years before we see the the dot com bubble and uh so this is right when the just the promise of the computer age was really becoming realized. And still before the Internet is

a common household term. We don't see the World Wide Web even start to emerge until two and we're just in right now. Yeah. I mean, big big news for Prodigy that year was they added an encyclopedia and zach

It's guide. Yeah yeah, and It's interesting also that even though we're seeing this explosion at this time of adoption UH, the analysts were looking at it and saying, well, you know, you've got more subscribers, but you spent so much money setting up this this company, perhaps as much as a billion dollars by this time, that it's going to take you years for you to become profitable, even and I love I love how in my notes I don't know what I was thinking in my notes by said dramatic

increase in Survivors. Apparently I had some sort of horror movie going on in my brain. I meant, customers, you are you are going to go be a zombie on stage? That is true that I do have. I do have to be a zombie in UH in approximately four hours. So you allow to be a zombie on Talk Like a Pirate Day? Is that? I mean? We're only recording

on Talk Like a Pirate Day. And I promised Lauren that I was not going to torture her on Talk Like a Pirate Day, particularly since by the time this publishes, Talk Like a Pirate Day will be along in the past. So you guys are going to be spared both the zombie and the pirate. Uh. At any rate, Uh, the survivors would be would still not end up giving enough money, generating enough revenue for the company to be profitable for

several years. Hey, guys, Jonathan from twenty twenty here interrupting the classic episode because it's time for us to take a quick break, did something that was incredibly controversial within the Prodigy community. Yeah, they started introducing these censorship rules. Yeah, so which I mean, I mean, I guess it's not censorship if it's not on a government. Yeah, they of all, we we use censorship as as sort of the kind

of shorthand way of saying. Essentially, what they were saying was that they didn't want to have any sort of profanity or objectionable material on the Prodigy service because they wanted it to be family friendly. So, now keep in mind, some of the stuff that was going on on Prodigy included these bulletin board systems where you could create messages, leave messages, respond to messages. They almost became like a

message board. And I don't know if you guys have ever been on the Internet, but sometimes people on this sort of thing can get a little bit profane. Flame wars can break out yeah, they can, they can start throwing in some personal attacks. They can use some language that is, as the pirates would say, salty. Uh so so yeah, so for first profanity was outlawed, then flame wars were outlawed, then the mention of another users handle. Yeah, you weren't supposed to use any sort of member names.

In fact, I read one report that said that one group got very much frustrated because it was a group of coin collectors and they had a a thread about the Roosevelt dime then, and because they were collectors who were interested in Roosevelt dimes. But but one member had to handle Roosevelt dime, which meant that they could not actually write about it because it was a member handle. Yeah, so these were these were got started. Yeah, well, handles

certainly had played a role in it. But yeah, you see at this time that the users were really starting to get aggravated by these policies. They felt that it was unnecessary and that it was hampering their ability to communicate. It was taking functionality away from the service that they were paying for, right and uh And however it was only on those those bulletin boards, So a lot of

traffic started shifting to email. Right, So people were using the email service on Prodigy, which at this time was still uh still very much restricted to Prodigy. It's not like you were emailing outside. So imagine that your school or your the business you work at that you have email, but you are only able to email anyone else who is also on that particular server, right, So you could not email someone who works for another company or goes

to another school. You could only only other people who were there are the ones that you could send messages to. That's kind of what we're talking about at this time. I mean, however, it wasn't like there were other services that had had it much better, right right. You know, until we see the inner connectivity to the internet, it just doesn't really you don't get the the expanded capabilities.

Although again in commercial business that had already happened there were businesses that had email or you could send it to people other than the ones that were on your email server. Consumer level, consumer levels still pretty much a novelty UM. Now. I will also say that this is when Prodigy changed one of its other email UM policies, but I'll talk about that when we get into the services that they provide. It was. It was in response

to the fact that everyone started using more email. Uh see, you also have to keep in mind that the data that is being sent back and forth, while it's it tends to be in small packets. Once you get up, you know, you have those numbers increase. Data transfer wasn't free, you know, sending information across telephone company lines cost money,

and it cost Prodigy money. And in fact, that was one of the biggest problems that Prodigy had was that their their costs were much greater than the revenue they were bringing in. So if they were to offer up something that originally was free, as in it was part of what your paid service already covered, and everyone started using it, then they would start incurring greater costs as a result. So that would end up giving them the

incentive to make it less free. In other words, you would have to pay an extra surcharge on top of your monthly feet in order to use certain services, because that's only way that Prodigy could either put a little bit of a control on the traffic that you know, it would decrease the traffic because people didn't want to pay for it, or they could recapture costs if people really wanted it, and they would pay for it anyway. Right.

That was also they increased their monthly subscription fee too, and they also in response to that, they also had more subscribers by then too, right, yeah, one seven million. Yeah, so that's you know, they're they're on the on the rise. And I'll keep in mind that by now we're talking about millions and millions of computers capable of running Prodigy. But the Prodigy was still losing money at this time. Yeah,

they still were not making a profit. In fact, Walter Mossberg and anyone who has followed technology for any length of time has heard that name. Walter Mossburg has written extensively about technology companies over the past couple of decades, criticized Prodigy, saying it lacked many features and then it was really kind of difficult to use. It was slow,

and it wasn't necessarily intuitive. That you know, while it might be easier to use than say an old Bold and Board system where you had to you know, tip through text commands to to navigate through it, it still didn't make a whole lot of intuitive sense, according to Mossburg. And that didn't new Prodigy very many figures moving on to ninety three. That's when Prodigy incorporated a new feature

and its software, which was Internet connectivity. Now, they weren't giving you the next necessarily giving you the access to a web browser. You could get a web browser and use Prodigy to connect to the Internet, but there wasn't one incorporated directly into Prodigy at that time, so they're

really still just an online service provider. However, what it did allow you to do is use email to send messages to people, yes, people who were not on the Prodigy island, and that year the company we actually start having figures now for how much money the company was losing. Keep in mind during this time, Prodigy is a privately run business. It's not it's not its own publicly traded company.

It's a partnership between IBM and Sears, but it's not itself a publicly traded company, so it doesn't have to file all of its corporate finances with the government, or well does, but not with the public like we don't have access to it. The government certainly did because otherwise the ass gets a little ansy. But the company that year, according to some sources, lost about sixty million dollars, so a sixty million dollar loss is not only not profitable,

but ouch. Yeah. This this figure comes from funding Universe, and I got to give them a shout out because they have a great uh summary of prodigies history and I managed to find a lot of my research from funding Universe. Uh. So that's when Prodigy hits its customer base peak about two million. Yeah, now that's that's its peak based upon on its own customers during the heyday of Prodigy. There is something that will change dramatically changed Prodigy late in its life that that blows that number

all the water. But you can't really count it because it's it's not customers that Prodigy themselves gleaned, right. It was almost like Prodigy was thrust upon them as opposed to as opposed that they came to Prodigy, right, But we'll talk about that when we get there. So two million customers, so obviously they never really hit that that promised five million that they really wanted to get. Uh. And they also expanded UM in October. I think you're about to say they they expanded UM to let users

use us net using usenet. That was a great phraseology that it's almost impossible to avoid. I mean that when you're services name is used net, it's going to happen. But yeah, use net is another bolton board message board kind of system where anyone who's used us net knows that this was c tells you can't get around it.

Anyone who has taken advantage of use net services knows that this is someplace where people where it would share lots of different things, files, pictures, information about different topics. A lot of message boards that you will find on the Internet really had their origin back in the use net days, and you could find pretty much any interest you can imagine. There was a use net dedicated to it. There was a more a thread dedicated to thinking back

here reminds me a little bit of like Reddit these days. Yeah, right right, Yeah. It's just or just like the idea that somewhere someone has made a web page about the thing you're thinking of. The example I will give is I remember when I was working for a consulting firm years ago. I decided to are one of the consultants I was working with wanted in a particular presentation to have a picture of a wammy. You know what a

wammy is no more? Wammy's no more wammy's. So there's a game show in the eighties called Press Your Luck, maybe early nineties called Press Your Luck, And uh, the way the game show worked was this little board would light up and at the light would move from one block to the next, and you would press a button and that would stop the light and it would either land on a great prize or something called a whammy. And if you've got too many whammy's, you were out

of the game. So she wanted a picture of a whammy. And I thought, surely someone this. Keep in mind, this is in the nineties when I'm saying this, So surely someone's made a web page about whammy's. And I did did the search, and sure enough I found five now, which just goes to show that if you could think about it, someone's made a web page about it. So so, so this was for an additional fee that was for three dollars and sixty cents per hour because it was

so information so data intensive. Well, yeah, it took up telephone lines again, so you know the fact that it was requiring Prodigy to have these lines open, and thus they had to pay for them. They ended up putting three dollars and sixty cents per hour as the surcharge. They also introduced chat rooms that year, and they introduced them free of charge. As it turns out, was a

terrible idea. Yeah, from a business perspective, it was a terrible idea, because every from a customer perspective, it was a brilliant idea. And now I can communicate with people in real time and chat rooms with lots of other people all at the same time. But for Prodigy there were two big problems. Well, that's also really data intensive, yeah, and also people will say the darnedest things when they

get together. Uh. And so the telecommunications charges went through the roof, and the content was something that Prodigy could not control. They couldn't censor that the way they could the bulletin board messages or the other services. In fact, there was a time where there was even a rumor that they were looking at emails, although they never were, but the rumor broke out that they were. So uh.

They ended up shutting down the chat rooms um eventually because of the the rising cost of operating them and the fact that they could not be certain that people would behave themselves in the chat rooms. According to Prodigies, idea of how people should behave themselves. The company that year lost fifty two millions, so although it lost a lot of money, it was less money than it lost the year before. I guess, um, that brings us up to right. So, oh, ninety five, that's when that's when

Rock and Roll found Prodigy. Um the former head of VH one, or one of the former heads of VH one, Edward Bennett, who had really turned the company around. Yeah, I had really turned VH one from a struggling channel into a success. I'm sure pop up video must have been one of those things that was just came out of that that era. He joined, He joined Prodigy as

the new CEO. Yep, And that same year they launched a web browser, Prodigy branded web browser, so you would go into your Prodigy account and then you could access the world Wide Web. Uh. And in ninety five, it was still still pretty much a Wild West kind of territory, although it was certainly getting larger adoption by then. The customers also could uh. Well, they now accounted for about let's see, I think there's one million of them, so

the numbers are actually dropped than before. But the company claimed that it was on track to becoming profitable, which had been claiming for the past ten years, right, right, But they're they're saying, no, we really mean it now, we are we are on the road to becoming a profitable business. They lost thirty four point six million dollars in that year, but less than the previous two years

half of half, like two years ago. Yeah, so they're losing less money year over year, which means that, in a way, you could say they're on the road to being profitable, assuming they can continue that trend. However, IBM and Sears basically bailed. Yeah, they said, you know what, guys, it's been fun, but it's also been holy heck on our wallets, right, because I mean they you know, definitely over a billion dollars in investments spent at that point

and in laws and revenue. The fact that they were losing money year over year meant that that one billion was just a starting point. They had to keep the company afloat during these years too, um so they so they wound up selling Producy Services Company to a company called International Wireless Incorporated. That the new management team was still led by Edward Bennett. But but yeah, they had some they cleared some house. Yeah yeah, in order to get it ready for the sale. I think that they

dropped seventeen percent of their workforce. Yeah. Yeah. It was one of those strategies that companies sometimes used in order to make them look better than than how they're operating. They lower operating costs in a way to lower operating costs get rid of some of those pesky salaries. Yeah, I mean that, you know. Either way, this sale was

for seventy eight point two million, which is embarrassing. Yeah, when you look at it, over a billion dollars in investments over the years, plus however much was need to keep the company afloat. Selling it for somebody eight point two million is really cutting your losses whether or not. That's the biggest uh, you know, biggest uh dump as far as it goes. No, there are other ones that

are even worse. I mean you can argue like things like MySpace and uh and there are other properties that had really dramatic investments and then a huge drop off. But it's it's definitely up there. So uh. The new strategy that the company has is to really kind of branch out to still offer the online service provider provider services that it had. So in other words, you know, this would still be something that you would log into

and you would have your curated content. Uh. And you could then also access some Internet functionality that was packaged under the name Prodigy Classic, right, or you could actually use Prodigy as an Internet service provider, and this would be the company that would give you the access to the Internet, so you could browse the Internet, send email, all the kind of stuff that we do all the time.

And that one that that service had an interesting name, So you had Prodect Classic, and then the Internet service provider branch was called Prodigy Internet. Really really creative marketing forces here. The company that year had also changed its name to Prodigy Incorporated. Yep, yep, So now it's Prodigy Inc. And uh, they changed the subscription package. Now it was no longer for either service. It was now you had to spend whether it was Prodigy Classic or prod Internet

didn't matter which. Uh. And that year the company lost ninety point eight million dollars. Yeah, And so I mean you keep in mind that the overall market all had been adding some three thousand subscribers per month um and had in fact declined to take over Prodigy yeah. They they supposedly visited the premises at some point and went,

you know, we're doing okay. They went to White Plains, New York, which is where Prodigy was headquartered, and Microsoft Network, which had been online for less than a year, had already surpassed Prodigy and subscribers. Yeah, so this is one of those things where, uh, and we'll talk a little bit, I guess towards the end about what we think kind of went wrong with Prodigy. I can at least speak to that a little bit. But it became pretty clear

in hindsight that Prodigy made some poor choices. Jonathwenty here again, we're gonna take another quick break, but we'll be right back. Alright, So we left off in nineteen six, so logically we should then move on to crazy talk. That was when Prodigy split into three divisions. So you had two divisions that looked at the core services. One of them were was specifically focused on domestic and one on international. But you had a third division as well, right, That one

was all about software developments. That was about building a new functionality and improving the existing functionality of the Prodigy service. That was all that it was doing, which they were doing. They had, around as the similar time, launched a supposedly the first bulletin board archive, which was essentially a search engine, and that was kind of a new crazy thing within

the bulletin board messaging board world. Yeah, we had some early search engines in those nineties cash, I remember things like web crawler. But this is you know, this is right when companies like Google are just starting to bloom. They're not even really on the horizon yet for most people. So it was certainly something that was still seen as

very much innovative. UM. As for the international UH efforts on part of Prodigy, we mentioned earlier that Europe was very much saturated with online service providers and internet service providers of their own, so Prodigy really didn't see like there was a great in road in Teably never even went there. They were just like, you know, so they started looking at other markets, and mainly at that time

it was Africa and China. They also started to make some impact in Mexico and in fact that would become more important, very important. UM they had around well in ninety seven, they estimated that they needed about one point five million customers in order to break even. UH. They did not have one point five million customers. In ninety seven they had about sixteen thousand compared to A O L's like eight million, right, and and that six thousand.

They actually had more customers than that, but six and thirteen thousand were the billable customers because because you know, they might have joined the service, but they were in that free free period, so they weren't being build for that. Actually, that was the year that FTC that the the Federal Trade Commission charged Prodigy, compu Serve, and a O L with all having made unclear free trial offers that didn't sufficiently warn their customers about being automatically built at the

end of the trial period. Excellent. I actually saw that lawsuit, like I had the information up on my page. I felt like I didn't have enough time to read it. So I'm glad you did because I was like, there's something legal happen in ninety seven. Moving on, Uh so, how much money did the company lose in nineteen seven and thirty two point seventy eight million? Wow? Wow, So keep in mind just a few years earlier. It was it was back in when they thought that they were

on the road to profitability. That's when they lost thirty four million dollars back in ninety five, and then just two years later they lose a hundred thirty two million, almost a hundred thirty three million dollars. Clearly things were not moving in the same direction as they had perceived back in ninety five, and certainly not where they were

hoping now. Right. So, apparently there were a lot of things going on in the market at that time, including this increased competition from the other rivals in the space. Uh and and so the company decides to do something really dramatic, something that they had only done a couple of times before. They were their their their name change. Yeah,

they changed to Prodigy Communications Corporation. Right. So then they also decided to lower the monthly fees back to about fifteen fifteen bucks, and they promised a new digital service that would be specifically geared for the brand new blistering le fast fifty six K modems. Yeah, I remember having a twenty four hundred mottem. I think in that time, I actually did think that K was blisteringly fast. I think I still had a fourteen four at the time,

so I essentially two point four is what mine was. Man, Yeah, you would you would just hope that whatever link, whatever thing you were looking at was just text, because if there was anything other than text, you were going to be there for a good couple of hours until my x files fan pages loaded very slowly. Um well, the truth was out there. Uh So the news service was supposed to be much faster. K optimized service is supposed to be faster and have more rich content than the

older services. Now, remember we said that the older services services had graphics, but these graphics were akin to what you might see in an old clip art, uh folder, Right, they weren't. They weren't like photo realistic pictures or anything along those lines. And when you see the commercial, you'll understand what I what I mean, because that be feeder.

It's pretty gorgeous. It's it's it's. My My favorite thing is the reaction of the old man when he sees the page load up about England and it's a little cartoon of a B feeder and he's like, Wow, how easily we were impressed back in those days, Like you know, yeah, like like pixel art on the level of that, Like

Diesel Sweeties makes fun of these days, right. Yeah. So at this time, the company was still maintaining two different services, Prodigy Classic and Prodigy Internet uh and combined those two services had eight hundred thirty thousand customers, only six hundred seventy one thousand of which were considered billable customers. So the company lost money yet again, but less than they had the year previous, less than half, only sixty five

point eight million point eight million. Yeah, it's tiny compared to the hundred thirty two So yeah, good at least at least it was a reverse in the trend because they had been losing more and more money each year. Yes. Um, So the next year they launched an I p O because why wouldn't you, Well, you've been losing money year over year, And I think I think that was one of those desperate bids to avoid bankruptcy kind of kind of I p O s. Because there's two kinds of IPOs.

There's the kind that we are like, wow, we're so excited and we think that everyone's going to give us even more money to do these wonderful things. And there's oh crap, oh crap, my car, don't take my car. Please put money in us, because we promise we are going to be much more profitable, very very soon. We promised we're going to sell it to a sucker right there, exactly.

That may also be the case, like we'll we'll only be publicly tradeable shortly, and then we'll we'll endure a hostile takeover, which will actually be just a takeover because we'll be like, please take over. But they raised about a hundred and sixty million out of that, Yeah, so they did raise money. The stocks share price originally was fifteen dollars from what I understand. According to Funding Universe, the highest point of the stock price in ended up

being about fifty dollars per share. But that was a time where the investment companies were very much excited about technology companies. We're talking about. This is also, yeah, this is the cusp. This is before, This is while the dot com bubble is inflating, right, So this is when we were all believing that the Internet was going to be the way everyone was going to do business from that point forward, that that the brick and mortar stores were going to die out almost immediately. This is how

everything's gonna work. We just have to make sure that we've got the business plan in place that makes it all magically happen. And I apologize for this age reference, Jonathan, but but this was right before I graduated from high school, and I've been married for two years, and and it was right about that time that all of my friends were going, like, we are going to make our fortunes

doing this Internet thing. Yeah. So obviously that's one of those if you're a company that offers access to this magical world called the Internet, you're in a good position. So they did do pretty well with that I p O and the subsequent year of investment, but not so well that they were actually able to generate a lot of revenue from this um. They would eventually, by the end of ninety nine lose eighty point four nine million,

So again it's gone up since the last time. But they also would undergo kind of a change as well because of this I p O. It allowed a company called Carso Global Telecom Essay c V. It's a Mexican company, to end up with sixty percent ownership of Prodigy. So this was one of those companies that ended up investing in Prodigy when they started making those in roads into Mexico, and in fact, Prodigy to this day is very important

in Mexico. But we'll get into that. So Prodigy launched a bilingual I SP service in the United States and also entered a joint venture into Mexico's largest I s P, which was called telmex And at that time the company also went ahead sold off its African assets, those those regional areas in Africa that had been supporting for only two point eight one million dollars. But later in Prodigy acquired a company called flash net Communications, which was a rival I s P and OSP where a hundred thirteen

million dollars. That did add two hundred and fifty thousand customers to their base. So now they've they've almost artificially added more customers in a way, because they ended up acquiring all the ones that had belonged to flash Neet. And then Prodigy and SBC Communications Incorporated, which is a telephone company, announced plans for a limited partnership and that partnership would make Prodigy the exclusive I s P for

SBC consumers. So, you know when I said earlier about how two million was kind of the peak for Prodigy, this is where the caveat comes in, because because SBC had something like seventy millions seventy seven million high speed Internet customers, which meant that because this agreement made Prodigy the the exclusive provider, it it boosted Prodigies numbers to an insane amount. But that's the thing is that these

were not people who were subscribing directly to Prodigy. Well they you know, it's they were because they had to, but they were subscribing to SPC and so it wasn't generating the revenue directly through Prodigy the way. The way, because prod also made money through advertising. They would put ads on their pages, usually one ad per page, so it's not like you would have tons of ads on everything.

So they would generate some revenue that way, so that there was also, you know, a method of making some money besides just direct subscriptions. Anyway. Uh, that was also the year where probably was shut down temporarily on purpose. Internally they shut down they or they turned off the lights, as some people have said, because there was something going on in ninety nine that a lot of people just I mean, you've heard the phrase, but you've probably forgotten

all about it. Whole two K thing. Yeah, back when we thought the world was going to end because all computers had only been programmed to run up through We're through through. No one had bothered to well, they had used they had only programmed the date for the year as two right, so computers would read ninety nine as And then everyone thought, wait a minute, what happens when they hit zero zero for two thousand? Uh? Does that mean the computers are just going to assume it's nineteen

hundred because it's going to reset to that value. It doesn't understand that there is another year here, and if that happens, how is this going to affect everything else? And so you had people saying, well, you're probably gonna have some interruptions and services, but that's about as bad as it's going to be. And then you have the other side of the spectrum where they said all of the world shall end, the financial markets shall crash. Basically be I know that fight Club hasn't did fight Club

come out that year? I know that fight Club wasn't a big thing at that point, but but but like basically the end of fight Club, I was just saying, like dogs and cats living together, maths hysteria. Yeah, so that that's essentially what we're looking at in fact, And it was one of those things where even I at

the time. I was not working at how stuff works at the time, but even at the time, I was thinking where do I want to be when becomes two thousand and I decided to go to a very flamboyant club in Athens and it was fabulous because I figured, if if the world is going to end, I wanted

to end with some amazing music. It's that's entirely fair. Um. Why two K was also the they retired Prodigy Classic that year and they started why twok is one of the reasons, along with other architecture problems that you know, it was not really a system that was intended to go along with all of these new crazy innovations, right, so they were really taking taking a similar model to America Online, where where the Prodigy service would launch you into a portal page where there then you could go

and do whatever it was you wanted to do. But uh, yeah, they wanted to kind of get away from having to support this this legacy system of Prodigy Classic because it was becoming less and less relevant and it required a diversion of revenue, it required a diversion of of assets. I should say, right, sure, it's still affected some two hundred and eight thousand subscribers, which Prodigy tried to move

to um to their Internet service with with middling success. Yeah, if you've ever worked with someone who was very much used to a particular type of system and then watched as they tried to navigate a new system, you can see how quickly they can become frustrated and disenchanted. They actually they actually provided a new homepage like at like a different port for the Classic customers who were moving to Internet that looked more like the original Classic port

to help less of transitioning. I think about every time anyone upgrades their operating system, or even when Facebook changes, I mean, you know, the Internet riots. Yeah, no, not my favorite thing to post at that is, the new Facebook changes are the worst thing to happen since the last Facebook changes, because that's how it always seems like.

At any rate. Getting back onto Prodigy and two thousand SBC, the company we talked about, the telephone company purchased at interest in Prodigy, and earlier Prodigy had been looking at possibly merging with earth Link and MindSpring, which would have been a very interesting outcome because all of these companies had sort of been suffering a against the onslaught that was America Online UM and SPC would essentially end up with controlling interest in Prodigy within the next year, so

they bought controlling interests, right. So moving ahead to two thousand two, SPC formed another strategic alliance, this time with a little company called Yahoo. Yeahoo Yeah. So two thousand two, this is this is back when Yahoo was doing some serious business, right, I mean, this was not the era where we all were wondering what Yahoo was going to be able to do to turn things around. This is when Yahoo is really on the rise, and uh, the alliance ended up creating a new kind of Yahoo portal.

So if you've been to, like, if you ever visited Yahoo back in this time, you remember that there was one of these things where you would get news and sports, and it's very similar to what you see today, although today it's much more of a sophisticated layout than it was back in the day. But this was sort of taking taking a queue off those old online service providers which had this curated content that everyone likes so much.

So that's when we see uh Prodigy sort of start to fade away, and in fact, SPC stopped allowing new Prodigy accounts. In two thousand two, they did let people who were hardcore fans of Prodigy retain their Prodigy dot net email addresses, which people still retain today. Yeah. Yeah, It's one of those things where it's almost like a badge of honor. It's like I was there concert t shirt.

Yeah yeah, yeah. But eventually it would get to a point where if you were to try to go to prodig dot net, it would lead to uh my A T A T T dot net page until around two thousand nine, and after that you just get an error. Yeah. So now these days, if you go to Project donet, at least as of the recording of this podcast, if you go to prodect dot net, you get an error message. By the time this comes out, maybe they've actually figured

out some way of resuscitating the brand. So really a few years later it becomes um uh that that SPC was looking at actually selling the brand name Prodigy to someone else who would want to whoever would want to use it. Right around two thousand five, there is a big push um they were There were a lot of rumors floating around that they were trying. Yeah, but no one, No one's purchased it now we will say that Prodigy Internet still is a thing. There is a Prodigy Internet.

It is in Mexico and it's the largest I s P in Mexico. So it's not that Prodigy has completely disappeared, but in the United States it's pretty much a non factor these days. UM. So let's talk a little bit about some of the services they would provide. We've mentioned a few of them already, and that this this idea of curated content we talked about the bulletin boards. UM. Also, early on they did not allow foul downloads. It was really the idea was that you were consuming content but

not producing it or sharing it. Yeah. But but later they would allow file downloads, although they would look at those as well to make sure that they've met the standards that they had set for everywhere else on Prodigy. Uh an electronic mail. Back in ninety one, we talked about how UH they ended up seeing a big surge in electronic mail use because due to their censorship of the boards, and so in response, what did they do.

They decided that, well, you know, this huge amount of electronic mail is putting a taxation upon our our transaction fees with the telephone company so let's pass that along to the consumer. Every month, you'll get thirty messages for free, and if you want to send more than that, you need to spend money. It costs money to have more than thirty messages in a month. And so that was sort of the response to this surge and email use.

And again that did not make users happy because firstly, since sinsored the bulletin boards and other messaging systems, and then they made it harder to send email. Yay that that some people would argue. That ended up being a major reason why Prodigy ended up failing was because they

had a lot of consumer unfriendly practices. Even though their original model, this idea of a flat fee and you get access to almost everything was very attract the way that they were creating policies was so against what the average consumer wanted that it ended up making it ended up alienating their their customer base. So then you get to uh the news again, the curated news. You get

to travel. You can make travel arrangements on Prodigy. Uh. They had specific partnership with American Airlines, so you could make a reservation on American Airlines through Prodigy. This again before the Internet, this or before we had access to the internet, this online service provider stuff. That's not like you could just go to American Airlines dot com and do whatever you want to do. This this precedes that

Triblocity did not exist. They could also you could also make hotel and car rental reservations through that same system, although keep in mind again this is through partnerships that they Prodigy had made with specific companies. It's not like you had access to everybody, all right, right, you wrote in your in your notes that it was like going to a mall, Like, not every mall is going to have the stories that you want. It's going to be you know whatever, Yeah, exactly, yeah, so you know just

what you exactly right. If if that store wasn't in that mall, you had to go to a different all well, the same sort of thing. If if you could not get access to a particular vendor through Prodigy, then that meant that, well, you have the wrong online service provider for your needs. The same same thing applies to the

shopping obviously, Sears clearly being a founding partner. Sears Merchandise had heavy representation in online shopping on Prodigy and around well more than forty other direct mail marketing kind of vendors, like any company that would other places that had large catalog. Yeah, that whole, the whole, like we will mail you are stuff because this is still you know, this isn't a time where this that was not the most common method

of delivering stuff. Right, Usually you would have this retail experience where you go into a store, so direct to customer was something that only a few vendors offered at that point. You could also do banking. The banking was through New York's manufacturers Hanover Trust Bank, so if you weren't with that one, too bad. And stocks yep, yep.

That was through Donaldson, Lufkin Engine Rhett, which was a Wall Street company that would handle the stock purchases so you could become a day trader if you wanted to. Early early on, they did groceries. They did online groceries. But I think that the price and availability of service was just so yeah, there was very low adoption and also it just costs a lot of money to run that kind of operation. Now, I will say I never used Prodigies grocery shopping service, but I've used other online

grocery shopping services. Back when they were more common, like webvan would be the I think that's even webban was the one I used, and I loved it, but it again was one of those things where I just could imagine exactly it had to be phenomenally expensive to operate, and unless you have a huge customer base right out of the gate, you're going to be operating at a

loss for several years, kind of like Prodigy. And then later on when it became when it started to do the prodec internet services, it began to offer things like curated content online, so you would go to your little online portal and that's where you'd see things like sports, business news, world news, that kind of stuff, kind of like yeah, who does um. They also did have have news writers. They had had they had an editorial team, the dedicated editorial staff that worked out a White Plains,

New York. So they had editors and writers working specifically to write content just for Prodigy users. So it's the same sort of stories you would see in other sources, like if you were to get a newspaper, but it

was written specifically for the Yeah. And then they also had instant messaging, Like they said, they had chat rooms for a little while, and then they had things like financial tools like portfolio management and personal finance tracking, so you could follow how your your finances were doing over time. Like when you see all your dot com stocks on like a meteoric rise and you think, I am going to be in the world's next multi billion air and

two thousand one, when you think, where where's my change? Jar? I want to go to McDonald's. Yeah, yeah, they I you know, I do think that in a lot of ways it was ahead of its time. I think that if Prodigy had come out in that wave that A. O. L did just a couple of years later, um, that the technology would have been such that they would have

had greater adoption. But but some of those I mean, I hate to use the word draconian for an Internet service provider, but who but who reads their bulletin board content and make sure that I mean that's that's right. Yeah, yeah, I would say that those decisions were what stood in Prodigies away from becoming like the dominant osp was that it wasn't that the service they provided was bad. A lot of it was good, but they were not prepared

for the initial costs that they incurred as they began. Um, they weren't prepared to endure that for as long as it was necessary for them to build up the customer base. They may decisions that upset customers, including not just the censorship or however you want a word it not just that policy, and not just the policy of charging more for email, but they started to do surcharges on other features as well. So not all features were not free but free with with subscription, right. Not all of them

were free with subscription. Some of them you would have to pay on top of your subscription fee. And these were things where people were saying, well, yeah, you you build this as I pay one monthly fee and then I have access to all these amazing things. But in truth, I pay one monthly fee and then I have the opportunity to buy more stuff all of these services that

I kind of want to use. And so it may very well be that their business plan, perhaps they had just priced themselves too low at the very beginning, and they maybe if they had gone with a slightly higher subscription fee at the very beginning, uh, it could have offset some of the costs they incurred when they started offering up these services, and maybe then they could have kept those services free with the subscription, and then they

might it might be a totally different story today. Maybe today we wouldn't be talking about A O. L. You know, like we wouldn't say that A O. L. Was had become the you know this this name, but we still know. Maybe we'd be talking about Prodigy. Maybe all of us would be talking about how many c D s we have that we accumulated over the years as Prodigy, c D after c D after CD, of of the basic kits as you can install it. Yeah, and analysts named

Richard Adler. I found this quote and I believe a New York Times piece from said somebody is going to make a lot of money in this business someday. I just don't know if it's going to be Prodigy. Yeah, and he was right. Some lots of people made lots of money in this It's just like this was this was unfortunately not the story for that, but I thought was an interesting one. Lauren and I both used Prodigy, so we're both prodigy kids. Uh, we're both prodigies. Really.

We don't want to our own horn or anything. It's just true. So, you know, no false modesty on this show at any rate. Uh, you know, it's an interesting story, and like I said, we'll probably talk about other ones in the future. Maybe we'll will have an episode where we talk about copy Server, maybe one about mind Spring. U. These are other interesting internet companies and kind of see what formed the basis of how we think of the Internet today and which ones are still around in which

ones are just a name that we associate with. Yeah, time's gone by. Stuff you missed. Industry class would probably cover these two if they looked at more recent history. And there's not a whole lot of online service providers in the days of the Vikings. And that wraps up this classic episode of tech Stuff. Hope you guys enjoyed it. If you have any suggestions for future topics that I should cover on the show, reach out to me on

Twitter or Facebook. The handle at both of those is tech Stuff hs W and I'll talk to you again really soon. Text Stuff is an I Heart Radio production. For more podcasts from my Heart Radio, visit the I Heart Radio app, Apple Podcasts, or wherever you listen to your favorite shows. See