Prodigy, the Sears-IBM Home Computer Venture, Goes Nationwide
Sep. 07, 1990
NEW YORK (AP) _ Prodigy, the home computer information service owned by IBM and Sears, says it hopes to gain a million subscribers by the end of 1991 and start turning a profit in a few years.
But some industry analysts are skeptical. Similar computer-based home shopping and information services with nearly as powerful backers failed to catch on and were closed in recent years.
On Thursday, Prodigy announced it was available nationwide except Alaska. The service says it already has about 465,000 members in 42 major cities, and now will be available in most areas.
Prodigy is losing money, but it should turn a profit in ''the early 1990s,'' said its president, Theodore Papes. He declined to discuss specific financial figures.
Analysts estimate the 50-50 investment in Prodigy by International Business Machines Corp. and Sears, Roebuck and Co. at $500 million to $800 million.
Among Prodigy's 900 services are news, sports scores, weather reports, children's stories and other features, as well as commercial services such as discount stock trading, airline ticket purchasing and home shopping through Sears, J.C. Penney Co. and other retailers.
Prodigy also offers a messaging service between members, and on Thursday added several new services, including an encyclopedia.
Nearly every Prodigy ''page'' has an ad at the bottom, making it the only advertiser-supported computer service. Papes said ad revenue helps limit subscription costs and eliminates the need for the per-minute charges levied by some competitors.
Prodigy costs $9.95 a month on an annual subscription basis and $12.95 on a month-to-month basis.
Subscribers also need Prodigy software, at $49.95; the right kind of computer, such as an Apple Macintosh or IBM or compatible models; and a modem, the device that connects a computer to the telephone. Prodigy sells a modem and software package for $179.95.
Prodigy says it has about 200 advertisers, including the retailers and banking services available on the system.
Prodigy was launched two years ago. By that time, CBS Inc., one of the original partners, had pulled out. Since then, it says it has been the fastest-growing computer information service.
Prodigy's chief competitors are CompuServe Information Services, which is owned by H&R Block Inc., General Electric Co.'s GEnie, and Quantum Computer Services, said Joshua Harris, president of Jupiter Communications Co., a New York research firm that follows the database industry.
Harris said both CompuServe and GEnie are highly profitable, in part because they have invested much less and have fewer employees than Prodigy, which employs about 1,300 workers.
CompuServe, the largest computer service at over 600,000 members, is aimed more at computer buffs than Prodigy, Harris said. That could work in Prodigy's favor since it is attracting more female users that CompuServe, and women do more shopping than men, he added.
Harris said it would be difficult for IBM and Sears to win back their investment.
As to Prodigy's growth prospects, he said, ''There's a finite pool of people with PCs and modems.''
He also said that with current personal computer technology, it takes more time to get at certain data in Prodigy, such as weather reports, than it would to turn on the TV to an all-weather cable channel.
Prodigy executives say one of the biggest hurdles they face is getting customers to try the service. There is a lack of knowledge of what it provides among the 20 million U.S. homes with computers.
IBM is helping boost Prodigy awareness by packaging it with its new home computer line, the PS-1, which it launched in June.
Similar so-called videotex services offered by two newspaper companies, Knight-Ridder Inc. and Times Mirror Co., were closed in the past few years after their parent companies grew discouraged with their prospects.
While Prodigy is an information service, its success may lie in its value to advertisers, analysts say.
''Prodigy is an extremely powerful marketing tool,'' says a report from Yankee Group, a Boston-based research firm, because it allows advertisers to know exactly how many people are reading their ads and, in many cases, provides demographic information on the viewers.