By Jack Limpert

The number that causes headaches among the top people at a print publication but is rarely discussed with the rest of the staff or made public: the renewal rate, the percentage of subscribers who renew each year. The renewal rate at a magazine or newspaper is like the body temperature of a person—it’s a very good way to gauge overall health.

An example: For many years, The Washingtonian had a paid circulation of 150,000, with 100,000 subscribers and 50,000 newsstand buyers. The annual subscriber renewal rate averaged 84 percent—of the 100,000 subscribers, 84,000 renewed their subscriptions and 16,000 did not. Where did the magazine find 16,000 new subscribers? Newsstand sales brought in about that many new subscribers from the blow-in subscription cards. That meant the magazine rarely had to spend money on direct mail solicitations to find new subscribers.

A renewal rate of 84 percent is very healthy—it doesn’t go much higher than that. Let’s say the renewal rate was 60 percent, closer to the rate of most magazines: Of the 100,000 subscribers, 60,000 renewed and 40,000 did not. Where does a magazine find 40,000 new subscribers? Let’s say blow-in cards from newsstand copies bring in 15,000, leaving a shortfall of 25,000. Back in the 20th century, before the digital tsunami, magazines got most new subscribers from direct mail. The average return on direct mail solicitations was about two percent—you sent out 100,000 direct mail packages to get 2,000 new subscribers. Sending out direct mail packages cost a lot: You had to buy mailing lists (Time magazine subscribers, holders of American Express cards, etc.), you had to pay  somebody to create, print, and send out the direct mail package, and you probably had to offer an introductory subscription rate that was lower than subscribers paid when they renewed. A magazine usually loses money on new subscribers the first year but makes money if they renew their subscription

If the renewal rate stayed above 80 percent, The Washingtonian was strong financially. Phil Merrill, a very smart publisher, bought the magazine in 1979 and in one of my early conversations with him about trying to win more National Magazine Awards he said, “There are only two numbers I care about—newsstand sales and the renewal rate.”

Phil understood the profit equation at strong publications: Invest enough money in good editorial content, keep the subscriber renewal rate high,  and sell a lot of copies on the newsstand. The profit equation at weak publications: Don’t spend enough on content and then pay a lot of money to find new subscribers because the renewal rate is too low. That was how print did it in the  20th century—publications with high renewal rates and a decent amount of advertising did well. Publications with weak circulation numbers often failed no matter how many gimmicks they used to sell ads.

Now almost every print publication is under pressure from the ever more useful digital world and the profit equation and circulation strategy is much more complicated. The debate over what to do often comes down to the top print people asking: What’s going to happen to our renewal rate if we give away our content on the web? The digital people answer that lots of people always will want the print experience and look at all the new people who’ll  see the magazine’s content on the web and some will become subscribers and don’t worry we expect digital revenues to increase each year.

What the print people then want to do is lock the digital people in a room and make them watch that scene from the movie Jerry Maguire: Tom Cruise is Jerry, the sports agent, Cuba Gooding is the athlete, and Cuba is telling Jerry “You can do better than that” while making Jerry repeat ever more loudly the four words so challenging to digital journalism: “Show me the money.”