The Source Enterprises, Inc. Business Information, Profile, and History
New York, New York 10003
History of The Source Enterprises, Inc.
The Source Enterprises, Inc. publishes The Source magazine, which covers hip-hop music and culture and is one of the largest-selling music monthlies on newsstands. The company also sponsors an annual hip-hop music awards ceremony and a syndicated radio show, and lends its name to a clothing line and compilations of hit songs and videos, among other activities. The firm is run by CEO and cofounder David Mays.
The magazine known as The Source was founded by two Harvard students, David Mays and John Shecter. While undergraduates, the two fans of rap and hip-hop music had begun hosting "Street Beat," a radio show on Harvard's student station WHRB, while Mays promoted rap concerts in the Boston area. In August 1988 the pair published a two-page newsletter they dubbed The Source. The simple publication, which contained a concert calendar and hip-hop news items, was produced with a budget of $250, and sent out to 1,000 fans of their radio show. The response was so favorable that the next issue was six pages long, and by the third the duo were selling advertisements and laying plans to create a magazine that they could sell regionally or even nationally.
Over the next two years, publication of The Source continued while Mays and Shecter completed their undergraduate degrees. During their senior year they borrowed $10,000 to keep the magazine going, and after graduating in 1990 they moved the operation to New York. At this time they also took on two new partners, Harvard Law School graduate James Bernard and New Republic magazine associate publisher Ed Young.
By 1991 The Source had become a 68 page, four-color publication, and advertising space was being sold to the major rap record companies. An estimated 50,000 copies were being distributed via record stores and newsstands, as well as 2,000 to subscribers. The firm's annual revenues were $1 million, two-thirds of which came from ad sales. Mays held the titles of CEO and publisher, while Shecter served as editor-in-chief.
In contrast with many magazines devoted to popular culture that included mainly photographs and stories about the stars, The Source took a more serious tack and covered the social and political issues that mattered to rappers, as well as more controversial topics including sexism in rap. It was officially dedicated to covering "Hip-hop music, culture and politics," a mission directly inspired by rock music's Rolling Stone magazine.
Formation of Source Entertainment & Marketing: 1993
In 1993 the company created a new division, Source Entertainment & Marketing, to take charge of and expand an existing fax newsletter, The Source Weekly, that was sent to radio stations, record stores, and music writers. The unit also began publishing the Hip-Hop Music Directory, an ad-supported industry source book, and issued a quarterly compilation of new music videos, Slamming Jams. Ad buyers in The Source now included Nike, Reebok, and Bugle Boy, and the 75,000 circulation magazine's staff had grown to 20. The firm had also recently begun sponsoring a touring "Source Van" that visited urban areas and college campuses, giving away promotional items and sometimes hosting personal appearances by rap performers.
In April 1994 the first Source Awards ceremony was held at the Paramount Theater in New York. Awards were given in 14 categories that included artist of the year, best album, and best video, with winners determined by the magazine's readers. The event was modeled on the more mainstream Grammys, which had paid scant attention to hip-hop. The magazine's circulation was now growing rapidly, and by mid-year stood at 125,000. Annual revenues were estimated at between $3 million and $4 million.
In September James Bernard, who had been elevated to co-editor-in-chief with Shecter, clashed with Mays over the publisher's use of The Source to promote a band he had managed in Boston. A three-page spread on the relatively unknown Almighty RSO, which Mays had allegedly penned under a pseudonym, was inserted into the magazine without Bernard's knowledge, and the furious editor wrote a public letter asking him to resign. Bernard had earlier been threatened by RSO leader Ray Scott with bodily harm if he did not give the group more coverage, and had banished them from its pages as a result. After his letter became public Bernard was suspended by Mays, which led most of the magazine's staff, including cofounder Shecter, to walk out in support. The December issue was put together with freelancers, and Mays subsequently hired new staff to replace the striking workers, including Bernard and Shecter.
In the spring of 1995 the second Source Awards ceremony was held, this time packaged by the company as a syndicated television program. It was picked up by only a few stations, and the firm lost several hundred thousand dollars on the endeavor. The failed television broadcast and recent staff firings had little impact on the magazine's circulation, however, which continued to grow over the next several years.
Newsstand Sales Top Rolling Stone in 1997
The latter half of 1997 saw The Source reach a new plateau when its single-copy sales topped those of the venerable Rolling Stone, making it the best-selling music magazine on newsstands in the United States. Its total paid circulation now stood at 357,000, of which nearly 90 percent was derived from newsstand sales, though the total amount was still dwarfed by the heavily subscribed Rolling Stone's 1.25 million. The end of 1997 also saw the first compilation album issued under the Source banner on Def Jam Records, as well as publication of the magazine's 100th edition.
A typical issue now ran to nearly 300 pages, of which ads constituted almost half. Readers were mostly male, with 60 percent African American and 80 percent under 25 years of age. An increasing number of major corporations were now buying advertisements, though record and fashion firms still led the pack. The Source refused cigarette and alcohol ads, however, because of the young age of its readers. The company's annual revenue was now estimated at $15 million.
In the spring of 1998 the firm introduced a new magazine, Source Sports, which covered its subject in an edgier, more "hip-hop" fashion than category leader Sports Illustrated. Later in the year an Internet portal, TheSource.com, was launched as well. It offered news, video clips, and concert listings, along with merchandise and ticket sales. The Source Enterprises was now also sponsoring a college fashion show/rap group concert tour, in association with Mountain Dew and more than a dozen clothing and shoe companies including Lee Jeans and Reebok.
In 1999 The Source Hip-Hop Music Awards show was revived after an absence of several years. Broadcast on the UPN network, it boasted strong ratings among younger viewers. The company had also recently founded The Source Youth Foundation, to help nonprofit organizations that performed outreach to young people.
In the fall of 1999 Source editor-in-chief Selwyn Seyfu Hinds quit the magazine after Mays allegedly "sweetened" a review of an album recorded by his friend Ray Scott's new group Made Men. Hinds subsequently joined Russell Simmons' Internet venture RS1W.com.
In April 2000 The Source Hip-Hop Music Awards made headlines when it was cut short by L.A. police after fistfights and bottle-throwing broke out in the auditorium. Several days later the ending was restaged and a sanitized version of the show was broadcast as scheduled, to solid ratings. Soon afterward, TheSource.com posted unaired footage of the fights online.
In the fall of 2000 two new television programs, dance show The Source Soundlab and news magazine The Source All Access, debuted on UPN. The Source Enterprises, which was also exploring the possibility of making feature films, had recently begun marketing a DVD called The Source All Access: Volume 1 which featured videos and interviews with rap and R&B stars. Meanwhile, the company's sports magazine, which was not performing up to expectations, was folded. Revenues for the year had grown by more than 20 percent, to $30 million, with profits estimated at $10 million. The Source's circulation was now edging close to 450,000, and CEO Mays declared his firm's goal to be "the Time Warner of the hip-hop generation."
In July 2001 the company's awards show, now moved to Miami, featured increased security from a Nation of Islam affiliate, and a smaller, invitation-only audience. Some 900,000 copies of a $4.99 companion publication were printed for newsstand sale. Though the show, which featured performances by such stars as P. Diddy and Eminem, went off without a hitch, there was a stabbing outside the official post-show party, and the next day Ray Scott, now known as "Benzino" and listed on The Source's masthead as a co-owner, was arrested for reckless driving, possession of marijuana, and assaulting a police officer. Miami Beach police later alleged that CEO Mays had pressured them to drop the charges, while he countercharged that the arrest was an example of "racial profiling."
2002: Earl Graves Buys $17 Million Stake in Firm
During 2001 Mays had unsuccessfully sought buyers for the magazine, reportedly asking $100 million, but in early 2002 he sold a $17 million stake to Earl Graves' Black Enterprise/Greenwich Street Corporate Growth Partners. In the spring The Source Enterprises joined with Reebok and Interscope Records to sponsor a national rap talent contest, while David Mays returned to radio as co-host of The Source Street Beat, a weekly three-hour syndicated program. Over the course of the year The Source's advertising page count fell by nearly 22 percent, due in part to the changing U.S. economic climate.
The world of hip-hop was famous for squabbles between rappers, and The Source itself had become a target of such rival publications as XXL, whose editor Elliot Wilson criticized the magazine in almost every issue. In the February 2003 Source a two-sided foldout poster was included that showed Wilson being crushed by a hulking figure on one side, and Ray "Benzino" Scott holding Eminem's severed head on the other. Though The Source had at one time supported the white rapper, it had turned on him and Scott had labeled him "a rap Hitler," apparently because Eminem's success appeared to be undercutting the impact of African American rappers including Scott. The issue of race had always been a sensitive one at The Source, which had been founded by privileged whites to cover the music and culture of mostly lower-class blacks. It had for some time been written and edited by a largely black staff, however.
Following the poster's publication Wilson shot back in print, while Eminem's label Interscope pulled its ads from The Source, and Eminem recorded an anti-Scott rap. The incident further eroded the magazine's credibility in some quarters, and the March issue of XXL, which featured Eminem, 50 Cent, and Dr. Dre on its cover, outsold The Source on the newsstand for the first time ever.
In September 2003 the company added a French language edition which contained a blend of translated articles and locally-written ones. Some 80,000 copies were printed by the French firm Arcadia, which paid Source Enterprises a licensing fee. The company was now also preparing to launch a line of branded clothing in conjunction with AST Sportswear which would be targeted toward such mass-marketers as J.C. Penney, while David Mays and Ray Scott had opened a hip-hop nightclub in Miami's South Beach area.
In the fall the magazine's campaign against Eminem heated up when Mays and Scott held a press conference to play decade-old recordings in which the white rapper disparaged African American women. The tapes were also made available on TheSource.com. Eminem apologized, saying he had been young and foolish at the time, and a number of members of the hip-hop community voiced their support for him. A plan by The Source to include a compact disc of the recordings in its February 2004 issue was met by a lawsuit, which was resolved when a judge allowed the inclusion of 20-second snippets of the songs and the printing of eight lines of text from the lyrics. The issue, which featured Eminem's photo on the cover and a long article on his alleged racial insensitivity, was seen by some pundits as more of an attempt to boost The Source's flagging newsstand sales than a serious journalistic effort. Eminem responded with a "mixtape" rap, and through an interview in XXL. For 2003 the magazine's ad pages had dropped by almost 2 percent, and newsstand sales by nearly 10 percent. Challenger XXL's circulation, meanwhile, had increased by more than a third during the same period.
In just over 15 years The Source Enterprises, Inc. had grown from humble beginnings to publishing the leading magazine covering hip-hop and rap. Though it faced stiff competition from several new challengers, The Source was still viewed by many as the most important magazine on its chosen subject, while the company's other endeavors gave it a strong presence in a variety of other media.
Principal Subsidiaries: The Source Clothing Company; Source Entertainment & Marketing.
Principal Competitors: Harris Publications, Inc.; Miller Publishing Group, LLC; Rap Sheet.
- Key Dates:
- 1988: Harvard undergraduates David Mays and John Shecter start a hip-hop newsletter.
- 1990: Now established as a magazine, The Source moves operations to New York City.
- 1993: Source Entertainment & Marketing division is formed.
- 1994: First Source Awards event is held.
- 1994: Much of staff leaves over Mays' use of magazine to promote a friend's rap group.
- 1997: The Source becomes top-selling music magazine on newsstands.
- 1998: TheSource.com and Source Sports magazine are introduced.
- 2000: Source Awards taping turns violent and is shut down by L.A. police; two Source-derived television shows debut on UPN; Source Sports folds.
- 2002: Earl Graves' investment firm buys $17 million stake in company.
- 2003: French edition bows; Source prints attacks on rival XXL, rapper Eminem.
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