SEARS AND IBM finally bailed out of the online service business this month as they sold their interests in the troubled Prodigy Services Co. to International Wireless Inc. and a group of Prodigy executives.
The new Prodigy will attempt to claw its way back into competition with CompuServe and America Online at a time when many telecommunications analysts are questioning whether the online industry itself has a future.
Much information that used to be available only for a fee through the online services is now available for free to anyone with a connection to the Internet's World Wide Web. Internet access, which helped drive the growth of the online services, is now being offered by powerful telephone companies.
With the world increasingly caught up in the Web, is there a future for the online services? And even if the industry survives, will Prodigy?
Jerry Michalski
Analyst, EdVenture Holdings, New York
They have a fabulous future. They just have to bend and mutate a little bit. Think of the online services as domed underwater cities and the Internet as the ocean. There will be very good reason for people to go into the habitable enclosed spaces.
For some time, the online services will be easier to use. There are many companies trying to come up with things that are just dTC as good on the Internet, but they're having a hard time.
If the online services are smart, they will become large gateways themselves. They can serve the same function as the answering machine. You check them all the time. The first service that develops a real nice, simple, interactive message center is going to do very, very well.
The online services that will succeed will focus on high-volume services. They'll focus on what do people really need. Prodigy is a relative long shot because they have so much legacy stuff they have to cut away. There's a lot of difficult decisions for them to make.
Jack Suess
Associate director, university computing services, University of Maryland Baltimore County
I think you'll have one or two online services survive this and actually become very large.
America Online is an approachable way for people who don't have a lot of Internet experience to get started on the Internet. The other services are starting to have a problem in matching AOL's approach to the consumer. It's hard to mimic what another service does because you're always a step behind.
Of course, if you find that you're spending the majority of your time just on the Web, it's time to move to a lower-cost provider. I think your larger telephone companies are going to be providing more of your basic Internet service.
Prodigy seems to be falling further and further behind when you look at the quantities of subscribers. I think you'll see Prodigy pick a niche market and go after it.
Harley Ungar
Senior analyst, Jupiter Communications, New York
I can see two different approaches for the online services -- the aggregator model and the exclusive-content model or a combination.
The first is as content aggregators. The Web is such an amorphous, frustrating environment. Most users need some kind of handholding to get through it.
The second model is of exclusive-content providers -- offering users content they can only get with, say, an America Online subscription. They have a very good chance of filling that niche.
There is a sort of schism about whether online services will continue to provide access. Over time, I think they will basically become programmers and producers. I just think the telephone companies are better positioned to provide access.
Emily Green
Analyst, Forrester Research, Cambridge, Mass.
The online services are gradually trying to redefine themselves. They're gradually zeroing in on content. They're trying to lessen their investment in and dependence on the network and the software -- not just get every magazine on the newsstand online but to do things you can't do anywhere else.
Right now the online services have a lot of momentum because they're profiting from the magic Internet tie.
That's going to continue for the next year or two, but after two years I see them slowing down in a big way.
Their proposition is that there's enough out there on the Internet that you need somebody to package it and digest it. It's like Chicken McNuggets: You chop it and form it into something that looks like chicken. People will realize they have an appetite for the real thing and that the real thing will be easy to get.
The biggest sign of this is the success of AT&T World Net in its first couple of months. They've had 675,000 requests for the sign-up diskettes. That means consumers are starting to roll up their sleeves and take on this thing themselves. This is the beginning of a real mass market.
Pub Date: 5/19/96
