What happened to Prodigy Internet

Last Updated on May 19, 2023 by Dave Farquhar

Prodigy was a late 1980s online service that later morphed into an Internet service provider. It survived into the early 2000s but faded as its business model disappeared. Here’s what happened to Prodigy Internet.

Prodigy: You gotta get this thing

what happened to Prodigy Internet
This was what the Prodigy signin page looked like in 1991, running under MS-DOS. Prodigy was successful for a while but what happened was it had to reinvent itself several times, including as an Internet provider.

Prodigy started as a joint venture online service in the late 1980s between IBM and Sears. IBM preloaded it onto its PS/1 computers, but it worked with any IBM-compatible computer as well, and later with Macs. Unlike some other services like Compuserve, it used a front-end that depended on certain computer architectures. You couldn’t connect to Prodigy with a Commodore, for example. This limited the market somewhat, but Prodigy’s creators bet that making the service easy to use would make up for it.

They guessed right. It launched commercially in 1988. By 1990, the Prodigy service was the second largest service of its kind, with 465,000 subscribers. It offered flat-rate pricing until 1993, and the price was low: $12.95 per month.

The Prodigy service was a walled garden, a mini Internet unto itself, much like AOL and other early online services. Household Internet access wouldn’t come until a few years later. With the original Prodigy service, you could e-mail other Prodigy users, shop, participate in discussion forums, and read online news. It didn’t offer downloads or games like its competitors, but it was much cheaper. Prodigy advertised its service heavily on TV, using the catchphrase “You gotta get this thing.” It was a true online portal, in the modern sense of the word.

Why IBM and Sears?

IBM PS/1, or IBM PS1
Prodigy gave IBM something compelling to bundle with its PS/1 home computer to help entice consumers to buy it. And it gave IBM and Sears a monthly revenue stream that lasted long after the initial sale.

Looking back decades later, the idea of IBM and Sears building a successful consumer-oriented online service seems odd. But in 1988, they were still near the top of their game. Both of them were huge companies, and to put it in contemporary terms, it would have seemed like Apple and Amazon teaming up on a joint venture today.

And for a time, the Prodigy service fit neatly into both companies’ business models. IBM was still the largest computer maker in the world, and having a good online service was a way to get back into the lucrative home market after the disaster of the PCjr. Sears, meanwhile, was one of the largest computer retailers in the United States. Companies like Best Buy and Circuit City were still in the process of expanding nationwide, so Sears was one of the few national retailers that sold computers.

Prodigy gave consumers something useful and easy to learn to do with their new IBM or IBM-compatible computer, and it gave IBM and Sears a revenue stream that lasted years after the original purchase. It even gave both companies a way to make money off consumers who bought an IBM compatible computer somewhere other than Sears.

And that was a booming market. Radio Shack was selling over $1 billion worth of IBM compatible computers each year in the late 1980s. This gave IBM and Sears a way to make money off that. It was a shrewd move. Or at least it seemed that way on paper. In execution, it didn’t quite go as expected.

Problems with the Prodigy service

Heavy handed censorship, accusations of stealing users’ data to spy on them, and price hikes hurt Prodigy’s reputation even as it grew, riding the wave of millions of people buying their first computers in the early 90s.
Prodigy caught on quickly, but quickly ran into problems. It turned out that $12.95 per month for unlimited usage wasn’t sustainable when the most popular offerings were the e-mail and forums. Eventually, Prodigy had to raise prices to keep up with its costs. That was unpopular, and users complained, but as long as the Prodigy service remained cheaper than the alternatives, most wouldn’t leave.

Most of the problems seem familiar today, but in the late 1980s and early 1990s, they were new and sometimes terrifying.

Censorship on the Prodigy service

Prodigy was known for heavy handed censorship. The forums were heavily moderated. Foul language and heated arguments weren’t allowed. But the censorship grew to not even being able to mention other users by name. In one infamous example, a moderator deleted a discussion in a coin collecting forum because it used the phrase “Roosevelt dime.” Prodigy happened to have a user named Roosevelt Dime. No one involved in that discussion knew that, which showed the problems with the rule.

Privacy concerns with the Prodigy service

I remember another issue, early in Prodigy’s years. A story circulated widely on private BBSs of a Prodigy user who found unrelated data–his own data–within Prodigy’s temporary files. This led to accusations that Prodigy stole your data and looked at it. Prodigy’s official response was that this was a bug in the program’s file handling, that when it overwrote deleted files, that formerly deleted content got mixed in with the Prodigy data. That’s theoretically possible, but people didn’t buy it. The story circulated widely among Prodigy members, but also among non-members.

The idea of the largest computer company and the second largest retailer in the country stealing and looking at your data was terrifying.

Prodigy eventually stopped caching data to get around this issue.

Giving features and then taking them back

Then Prodigy made the mistake of offering unlimited chat, then taking it away when the cost ballooned. Between raising prices and giving services and then taking them back, Prodigy had a PR nightmare on its hands.

How Prodigy survived its missteps, for a time

The original Prodigy service survived all of this largely because huge numbers of people were buying computers and modems for the first time in the early 1990s, so there was a large pool of potential customers to draw from as the early majority phase of marketing kicked in. And those new customers weren’t necessarily aware of its past problems.

But that wouldn’t last forever.

And then the Internet happened. That caught Prodigy and its competitors off guard. In the end what happened to Prodigy was its inability to maintain relevance once the Internet took hold.

How the Internet changed everything

what happened to Prodigy Internet
Late in life, Prodigy reinvented itself as an Internet provider. Between that and a partnership with DSL provider SBC, Prodigy Internet remained fairly successful, for a time.

The Internet was something that people who knew a lot about computers always asked one another about. College students in the 1980s and 1990s could get access to it, if they knew who to ask, and it provided a similar experience to services like Prodigy. You could e-mail people, transfer files, participate in discussion groups and realtime chat. It had commercial potential, but was hard to use. But then along came this thing called the World Wide Web, which made it graphical and easy to use. In 1993, things started coming together. Companies like Prodigy and AOL mostly ignored it at first, then used it to connect themselves together, so a Prodigy user could send e-mail to someone on AOL or Compuserve.

In 1994, Prodigy started offering Web access, using its own proprietary web browser. Since their browser was nonstandard, it had issues, and by 1996, Prodigy offered true Internet access so mainstream browsers could work with it. It also offered web hosting. The original, proprietary, closed-off Prodigy service closed in 1999. The official reason was the rollover to the year 2000. Maybe the Prodigy service had Y2K problems and maybe it didn’t. Y2K was a common excuse to wind down anything you didn’t want to support anymore in 1999. What remained of Prodigy became Prodigy Internet, successfully reinventing itself as a dialup Internet service provider. But what happened next killed it. It turned out Prodigy had only traded one business model with a short shelf life for another.

Broadband started to overtake traditional dialup service in the late 1990s, threatening Prodigy’s remaining business model. It wasn’t practical for companies like Prodigy and AOL to run high-speed data lines directly to its subscribers’ homes. What happened to Prodigy Internet was a transfer of the responsibility to get online from dialup providers to cable and phone companies. Since they couldn’t become one of those, they joined one.

Prodigy Internet’s swan song

To give itself a chance at survival, Prodigy entered a partnership with SBC, the Baby Bell spinoff that later merged with AT&T and adopted the AT&T name. SBC was a large DSL provider. The partnership worked, but DSL was such an improvement over dialup that SBC could have branded it almost anything and it would have sold. SBC’s installer set your homepage to a Prodigy property and signed you up for a Prodigy e-mail address, and that benefited Prodigy.

Then in 2001, SBC purchased Prodigy outright, and migrated Prodigy services into its partnership with Yahoo. SBC attempted unsuccessfully to sell the brand in 2005, then slowly folded what remained of the old Prodigy content. AT&T cut off the old Prodigy web hosting sometime around 2009.

The once high-flying brand slowly faded away within AT&T, largely forgotten. That’s what happened to Prodigy Internet.

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