MUSIC ROYALTY, ADVERTISERS TURN UP `SOURCE'S' VOLUME: JANN WENNER IS AMONG HOT MUSIC TITLE'S BIGGEST FANS

When the source marked its 100th edition in December, it threw a little party to celebrate -- for 1,600 people. The room was filled with the kind of music royalty the monthly magazine regularly celebrates: Fab Five Freddy, Jeru the Damaja and Def Jam leader Russell Simmons. When founder and publisher David Mays rose to the podium, he spoke with Queen Latifah by his side. It was a moment that demonstrated just how far The Source has come. It was all astounding; after all, this magazine was but a two-page college newsletter in 1988. In just 10 years, The Source has become a major player in the music category, benefiting first from its precognition of the emerging hip-hop culture, then by becoming a dominant voice of the movement. VITAL YEAR Last year was vital for The Source, which inked deals with new advertisers Visa USA, DKNY, Gillette Co. and Nautica. Two noteworthy recent additions that signal The Source's vaulting into the mainstream are schedules from Gillette's Right Guard and the National Fluid Milk Processor Promotion Board. Capell's Circulation Report named the title to its annual list of best circulation performers, noting that the book had 50% total circulation growth in the first half of 1997. According to Capell's, the magazine's rate base is four times what it was in 1994, with ad pages up 32% last year to 1,076.22. ABC reports the title's circulation for the year at 370,691, up 21%, with subscriptions up 45,304, a gain of 22.7% and single copy sales up 20.7% to 325,387. While The Source didn't launch with the help of any major publishing company, its grass-roots growth has proved it to be a scrappy contender. And more and more advertisers are seeing hip-hop as a legitimate cultural force. "There has been an increasing trend that fashion and culture cross over from music into the society at large," says Mickey Marks, senior VP at Creative Media. "Hip-hop in particular has been a rich source." OVERALL AWAKENING Mr. Mays contends "there is an overall awakening amongst corporate America about the hip-hop generation; that it's a different market from Generation X. It's a multicultural group that advertisers are realizing is reachable and important." Mr. Mays acknowledges 1997 was a breakthrough year on the advertising front. He says the beverage category was especially lucrative for the magazine, with ad dollars coming from Coca-Cola Co.'s Sprite and Pepsi-Cola Co.'s Mountain Dew. "We also broke through with the grooming category." Associate Publisher Peter Ferraro says he sees future ad opportunities in the candy, videogame and auto categories. MARKETING TOUR One of The Source's most substantial promotions in 1997, the "All-City Hip Hop Tour," is set for a sophomore season; it will start in March. Title sponsor Mountain Dew has expanded its involvement, allowing the magazine to add two vans to its current fleet. The eight vans will go to concerts and retail locations, providing sampling and product distribution. Last year, 13 markets were targeted. This year, 34 markets will be covered before the program ends in October. Mountain Dew's "commitment is huge," says Mr. Ferraro. "It's a seven-figure program for them, coinciding with a big schedule in the magazine." Pioneer Electronics, producers of car stereos, is also on board for a second season, and videogame company Fox Interactive has joined as a new participant. FashionNation, another promotion from 1997, will be resurrected this spring. The details for the in-store and on-campus events are still being worked out. MUSIC CATEGORY FRAGMENTS Roberta Garfinkel, senior VP-director of print media at McCann-Erickson Worldwide, says the music publication field has split into "almost a bunch of subcategories. Rolling Stone is like the blanket magazine. It's the Bible of the industry. Then there's a lot of niche publications." This proliferation of niche publications, Ms. Garfinkel explains, makes targeting a specific demographic relatively easy. She classifies The Source's position as "young and urban." While The Source competes with Vibe/Spin Ventures, smaller hip-hop titles such as Stress, On The Go and ego trip aren't yet providing much of a challenge. However, one new entrant to the category, XXL, a 500,000-circulation quarterly launched last August by Guitar World parent Harris Publishing, may be large enough to eventually give The Source more serious competition. FLIRTS WITH SELLING While rumors circulated after Mr. Mays met with Rolling Stone founder Jann Wenner last year, nothing came of the talks. Mr. Mays has said The Source does not need a major investment partner, which may be true; but it also may be that Mr. Mays is simply not ready to part with his baby. When asked if a possible deal is dead, Mr. Mays responds, "The Wenner thing isn't completely out of the picture -- but there's nothing happening right now either." The title is believed to have had revenues of about $15 million last year, and profits of close to $4 million. Mr. Mays has been said to have valued the title at $60 million, a price that would be 15 times the earnings of the single title. That is not outrageous given that the magazine is booming. While Mr. Wenner refused to comment on any conversations he may have had with Mr. Mays, he is enthusiastic about the upstart title. "The Source is really well done. Every page is just breathing with life and energy, commitment and passion about the music. It's the thing most like Rolling Stone to come along yet, the title closest to the story of Rolling Stone," says Mr. Wenner. Mr. Wenner says Mr. Mays is a dedicated loyal believing fan covering the music. "What drives it is David; it's really his show," says Mr. Wenner. EYE ON THE FUTURE One project that will keep Mr. Mays and his staff busy in the new year is The Source Sports. While sales figures aren't yet complete from fall 1997's basketball preview issue, Mr. Ferraro says the numbers were consistent with newsstand sales for The Source. Mr. Mays plans to publish The Source Sports in May, August and November, making his company one more player trying to get in on the sports title category. ESPN launches its title in March. "These issues will be all different sports, not just a preview of one kind of sport," explains Mr. Mays. He says circulation will be about 300,000-plus. Mr. Mays is also in negotiations with several networks to bring a hip-hop awards show to TV, which would be scheduled for fall broadcast. A weekly, two-hour syndicated radio show will launch in the middle of the year.

MUSIC ROYALTY, ADVERTISERS TURN UP `SOURCE'S' VOLUME: JANN WENNER IS AMONG HOT MUSIC TITLE'S BIGGEST FANS

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