Because of an editing error, a Business article yesterday incorrectly reported monthly rates charged by Prodigy computer service. The company formerly charged $9.95 a month if subscribers paid monthly. The new monthly charge is $12.95, but if payment is made a year in advance, it remains $9.95. (Published 9/7/90)
Prodigy, the amply funded venture of International Business Machines Corp. and Sears, Roebuck & Co. that is struggling to bring computer services to millions of ordinary American homes, plans to announce today that it will improve its offerings, go coast-to-coast and increase its rates for some subscribers.
Prodigy's move is the latest by the computer industry still trying, despite costly failures in the 1980s, to create a mass consumer market for "on-line" services that so far have attracted mainly businesses customers and dedicated computer hobbyists.
Using telephone link-ups, the services enable people sitting at computers at home to do such things as shop, pay bills, check stock market prices and make investments, research term papers, get up-to-the-minute news, send electronic mail to other subscribers, reserve airline seats and play video games.
G.E. Information Services Inc., a Rockville-based arm of General Electric Co., recently announced it would offer a flat rate for its service of $4.95 per month for nighttime use. The move was an attempt to address consumer resistance to per-minute charges that have hobbled growth of the services.
This summer, IBM rolled out a new low-cost PC, dubbed the PS/1, which is aimed at home users. The PS/1 is intended for use with Prodigy, as well as with Quantum Information Services of Vienna, which also offers such services. In the past two years, telephone companies have also begun offering easy access to other companies' on-line services in hopes of building a mass market for the day when rules that block the phone companies from selling these services directly are lifted.
Almost since the invention of the personal computer in the mid-1970s, pundits have forecast that it would become a communications tool almost as common as the phone. Companies such as CompuServe, to date the industry leader, and G.E. Information Services have built major businesses with on-line offerings, but they have had trouble penetrating the ordinary home.
Cost and difficulty of using PCs are two reasons. "PCs are not for everybody," said Gary H. Arlen, editor of Interactivity Report, a Bethesda-based newsletter that follows the industry. Skeptics also suggest that ordinary Americans simply don't want the services and would prefer to communicate by traditional means.
Today, only about 1.7 million U.S. households use the services, Arlen said, even though close to 20 million households have computers.
In the 1980s, media companies Knight-Ridder Inc. and Times Mirror Co. launched home services that harnessed the living room TV as a monitor screen, but they later closed them down in the face of tepid interest.
Still, companies keep trying. "The feeling in our industry is that it is going to happen. Our only question is how soon," said Robert L. Smith Jr., executive director of the Silver Spring-based Videotex Industry Association.
IBM and Sears to date have put $500 million to $700 million into Prodigy, which was introduced two years ago. Its strategy differs from many of its predecessors in that it seeks to make money not only from subscriber fees but also from on-screen advertising and commissions from consumer transactions negotiated over the Prodigy network.
Among its stronger selling points are bright color graphics and relative ease of use. But many people have found it annoyingly slow to respond to commands and note that it works best with high-end computers that ordinary households cannot afford.
Jeanette Noyes, a research director at Yankee Financial Group Inc. of Greenwich, Conn., praised Prodigy's efforts to craft services that are useful to ordinary consumers. But she said: "It's going to take considerable new orientation for people to think of their PCs as an information and transactional tool. ... That's not going to happen overnight."
Starting today, Prodigy will extend its network throughout the country, allowing more than 90 percent of the U.S. population to reach it with a local telephone call. Prior to this, the firm could be reached by only about half of the population.
Also starting today, Prodigy's standard offerings will include a new on-line encyclopedia as well as 30 or so other "enhancements."
Subscribers now pay a flat rate of $8.95 a month. Under the new system, they will pay $12.95 on a monthly basis -- or the existing $8.95 if they are willing to pay for the entire year in one advance payment. Geoffrey E. Moore, the company's director of market programs and communication, said the move was based on surveys that showed that users prefer to pay the same way they pay for magazines.
According to Interactivity Report, Prodigy will also announce a large marketing campaign and tie-ins with major national retail chains and a 25 cent fee per electronic mail message after the first 30 messages per month. Messages are now free in any number.
Moore said the service has about 460,000 subscribers with a goal of 1 million before the end of next year.