The first purely consumer on-line service in the United States was The
It was founded in 1978 by William von Meister, a
local telecommunications entrepreneur who envisioned a home information
utility that would do for computers what AT&T did for telephones.
However, The Source, headquartered in McLean,
Va., soon encountered rocky times. High start-up costs and slow consumer
response caused it to be in financial trouble almost from the beginning.
It received an infusion of new resources and
direction when controlling interest was purchased in 1980 by the
conservative publishing giant, Readers Digest Association.
Readers Digest reportedly paid $6 million for its 80 percent holding,
according to The Washington Post.
Readers Digest certainly appeared committed to
the project. In 1981, Readers Digest thought things looked so promising
that The Source was authorized to build a computer facility of its own and
purchase a bank of minicomputers to run it.
The ability to create online news reports was a primary reason for Reader's Digest's interest in The Source. In 1982, a newsroom was founded and news reports were made available to subscribers.
The Source said it was guided by the philosophy
of its parent company to provide "self-help information in personal
business decisions and improving life quality." It broke its database
services into communications, news, weather, sports, business and
investing, education, games, travel and personal computing.
News from UPI was said to be available on The
Source within 2.5 minutes of the time of it being filed by the service.
The Source also had excerpts from at least 30 major magazines. Subscribers
could choose to read any of 6,000 Mobil restaurant reviews, check airline
schedules, order 30,000 products at a discount or amuse themselves with
the 60 on-line games that ranged from the Civil War to Star Trek.
A 1984 InfoWorld article discussed the services
of The Source and their popularity: "The most popular category is
communications, which includes electronic mail and Participate, a
sophisticated electronic computer-conferencing system. News services
include United Press International and Associated Press news wires,
features, and sports; Accu-weather, and various specifically focused news
databases. Business services include the Media General stock analysis
database and various securities price databases, as well as business
The Source was primarily a text-based system,
initially lacking the graphics capability of Viewtron. But in late 1984,
The Source added "graphics designed to convey a different
image," and dropped its long-time slogan, "Americas
Information Utility," replacing it with the "Information
The Source initially charged users $100 for a
start-up fee, though that was reduced to $49.95 in August 1984. Hourly
rates varied from $7.75/hour to $27.75, depending on the baud rate of the
users modem and the time of day of access. Initially, users connected
at 300 Bps, but the speed was later increased to an optional 1200 Bps as
The Source became available in 400 cities. The minimum connection fee was
$0.25 per call and the minimum monthly fee was $9.
Still, times were tough for The Source. By
mid-1982, it was estimated that Readers Digest had lost $15 - $20
million on The Source. There were 23,000 subscribers. Response time was
slow, taking up to 60 seconds for a screen of data to appear.
To enlarge the subscriber base, The Source began
to focus on the business sector, targeting "upper-level managers at
the forefront of applying personal computers to daily communication."
It added such services as online
brokerage, stock quotes, portfolio management, brokerage reports, etc.;
The Source claimed that business users represented about one-half of its
customer base. It was the first online service to allow trades..
The Source claimed that business users represented about one-half of its
customer base. It was the first online service to allow trades through a partnership with a Los Angeles brokerage firm.
Under that focus/philosophy, The Source continued
to grow, albeit at a somewhat sluggish pace, acquiring 29,000 subscribers
by the beginning of 1983.
That same year, Control Data loaned $5 million to the Source with an option to convert the loan to stock amounting to 30 percent ownership of the service. It never converted. With financial difficulties of it own, Control Data requested return of the loan in 1987, which was granted.
The Source also generated revenue by allowing
private networks within the network. "Private networks within The
Source network let private organizations communicate, disperse news and
information quickly, transmit files and hold closed teleconference. In
effect, these groups became their own systems operators within the larger
network, paying a one-time fee of $5,000 for a license and monthly billing
rates by users shared between the sponsoring organization and The
Source." Aumente, J. New Electronic Pathways. Sage: Newbury Park,
Calif. (1987) p. 74.
By 1984, The Source had grown to 55,000
The typical subscriber was male, late 30s,
college educated, had a high family income and nearly 75 percent were
business leaders or professionals. Nearly one in four headed a company.
Source Telecomputing Corp. severed ties with
Control Data Corp. in January 1987 as Readers Digest became full owner.
Readers Digest reported that The Source became
profitable in 1986, when the subscribers passed the 60,000 mark. With
61,000 subscribers, annual revenue was estimated at $13 million. The
service may have been operating at a profit, but there had been millions
invested in the system over seven years that needed to be recovered.
A New York venture capital firm bought The Source
from Readers Digest in April 1987. Welsh, Carson, Anderson & Stower
reportedly paid $10 million. Other reliable sources said the purchase price was closer to $4 million.
Alfred Glossbrenner, an author and expert on
online information, said he believed "the series of ownership and
management changes at The Source contributed to a lack of marketing focus
as the firm grappled with slack demand."
With 500,000 members, contrasted with The Sources
53,000 (down from a peak of approximately 80,000), CompuServe purchased
The Source on June 29, 1989 for an undiscolosed sum, and thereby
eliminated a long-standing competitor. Hardly more than a month later, The
Source was terminated Aug. 1, 1989. Users were offered a $20 credit to
The Source, which debuted at roughly the same
time as CompuServe, did not achieve similar success, according to Jupiter
Communications, a firm that monitors the industry, due to three
- First, CompuServe
started its network as a branch from its core business, which was
batch processing and time sharing. Beginning the on-line system was
simply a matter of using its existing hardware for the night-time
users. The Source, on the other hand, built its operation from
- Secondly, The Source
never updated its technology; the software and hardware has been
nearly the same as it was 10 years ago.
- Lastly, change of
ownership clouded long-term planning. ...The company sold access to
the future, and they had customers who were willing to see what the
future looked like. But the company never got over this initial hype.
"They didnt concentrate on what people used and abandon what wasnt
successful. Webb. J. A. July 1989. "CompuServe purchases The
Source." Information Today. Vol 6. No. 7. p.1.
Like Viewtron, the Source had a sign-up fee that may have discouraged some
users. Paying a monthly membership, a line charge and $100 to join, may
have discouraged some. "CompuServe was initially giving their
service away, Glossbrenner said. "At a critical time, The Source
was charging a lot of money for their product, and people werent even
sure what it was. I think that stuck in a lot of peoples craw."
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