The ABCs of renewal percentages

Folio: The Magazine for Magazine Management, Sept 1, 1990 by Eliot Schein

There is a new option on the Audit Bureau of Circulations (ABC) pink sheet for consumer magazines. It is becoming increasingly popular-and it is going to cause a great deal of trouble and confusion for circulators unfamiliar with the specific information required and the manner of ascertaining that information. The option is renewal percentage.

And before we go any further, permit a crystal ball observation: The use of renewal percentages on an ABC pink sheet, which is not now mandatory, will become more and more popular in the next five years. The reason is that much of what a magazine requires for its ABC statement is monitored by and provoked by its competitors. If your head-to-head competition is publishing a renewal percentage, you can bet that their ad sales people are promoting their renewal percentage on sales calls-and also promoting the fact that your magazine does not show one. "What are they hiding?" is likely to be the question of the day.

To avoid embarrassment when the renewal percentage derby reaches full speed ahead (which will either occur by 1995 or stall out before it even gets started), you should know a few things about what constitutes a renewal percentage. Document the numbers

If your magazine's competitor begins to "advertise" their renewal percentage, it's a sure bet your ad promotion people are going to be dying to counter in kind -especially if your publication can come up with a higher percentage. Be aware, however, that the ABC rules specify that if you advertise your renewal percentages in any promotion, you must follow up, within a reasonable period of time of that promotion, with proof of those numbers to the ABC-which will in turn publish them on your pink sheet (or audit statement). Just make certain that you can substantiate those numbers to the Audit Bureau. The penalty for publishing unconfirmable data in such an effort is the printing of "failure to comply" on your future statements-wording that is a little bit more damning than the Surgeon General's warning on cigarette packs.

And what goes into these percentages is somewhat more than what meets the eye. A Midwestern magazine with a better than 600,000 paid subscriber base was promoting the fact that it had a better than 70 percent renewal rate. To reach that number, the magazine included more than 100,000 of its five-year renewals that had occurred within the previous one or two years. However, the ABC said that none of those 100,000 were qualified renewals. The publication had thought that all they needed to do (pay attention, please) was take their total number of subscribers in the calendar year just past, subtract the total number of nonrenewed expires and all new subscribers that were not up for renewal during the year, and the result would be the renewal percentage. It's difficult to argue with this logic.

It stands to reason that if you start the year with 500,000 subscribers up for renewal and you add 100,000 new guys, you get a circulation of 600,000-assuming that you have 100 percent renewal. Right? Wrong, according to the Audit Bureau. Only those renewals that are up for renewal during the period being audited count for the percentage. Therefore, a subscriber who renews for five years at the end of his or her subscription will again be part of the renewal statistic of the publication only in the year in which he or she is due to expire.

Now, it makes sense that a subscriber who would renew a subscription on a five-year basis is a most valuable reader of the publication. What other reason for a five-year renewal? And the better the publication, the greater the percentage of multiyear renewals that publication should have. Yet the ABC penalizes any publication that doesn't renew every subscriber on a one-year-at-a-time basis. Thus, the best subscribers do not become part of the renewal percentage formula unless they are due to expire in the year of reporting.

In discussing this situation with Val Russell, manager of magazine field auditing for the ABC, ABC made the following argument: A new subscriber may be very interested in the magazine's subject matter, renew for five years-and then lose interest completely in six months, one year, two years, or three years. Therefore, that person is no longer a valid or desirable subscriber for whom the advertiser wishes to pay.

This sounds like a pretty good argument. In fact, during the discussion it became clear that there are many problems that are going to be confronted by circulators when it comes to providing documented renewal data as part of their audit statement. Russell came up with 10 problems with renewals and expirations which, with a little paraphrasing to address the circulator's standpoint, are provided herewith.

1. Renewal of expirations Many publishers believe you take the total subscriptions received, other than new subscriptions, for a six-month period divided by total expires. But renewal of expirations requires a subscriber-by-subscriber trail. That is, John Doe expires, John Doe renews, so John Doe counts as an expire and a renewal of that potential individual expiration.