Boston Consulting Group Survey on E-Readers and Tablets_Key Findings_2010

BCG e-reader survey Key findings May 2010

Background and context Competition is heating up in the market for e-readers and tablets. Single-purpose e-readers like Amazon's Kindle and multi-purpose tablet devices like Apple's iPad are both selling strongly, and many more devices are poised to enter the fray. In response, content providers are scrambling to develop immersive applications for these devices. These devices could dramatically reshape the media and broader consumer electronics industries, tech, and software industries. Several outstanding questions will determine the degree and nature of their potential impact: • At what price will consumers flock to these devices? • What killer applications/content platforms will emerge? • In addition to reading, what else will consumers want to do on these devices? • How much are consumers likely to pay for different types of content on these devices? • Will widespread adoption destroy the value of media companies (as the introduction of MP3 players did) or is there reason for optimism? To begin answering these questions, The Boston Consulting Group (BCG) conducted a survey of nearly 13,000 consumers in 14 countries, including the U.S., U.K., France, Germany, Japan, and China, in March 2010. The findings are telling. 1

Key findings from the survey The e-reader/tablet is poised to become one of the most successful consumer electronic/tech products • Over half of U.S. consumers are familiar with the device • Globally, 30-50% intend to purchase a device within a year; 50-75% within three years Widespread adoption will depend on a drop in price and a shift toward multi-function devices • The sweet spot for multi-purpose devices seems to be $130-$200; $100-$150 for single-purpose devices • 66% of global consumers prefer a multi-purpose device; 24% a single-purpose device Consumers are willing to pay relatively attractive prices for content • 100%, 80%, and 70% expect to read books, magazines, and newspapers on e-readers/tablets, respectively. • U.S. consumers are willing to spend $5-$10 for a digital book; $2-$4 for a magazine, and $5-$10 for a monthly newspaper subscription But they also expect to do more than just read, suggesting that e-readers/tablets will become the first truly converged device • 90%, 86%, and 74% of U.S. consumers expect to browse the Web, send email, and view videos, respectively Finally, in the context of the battles between Apple, Google and others to define the competitive landscape of the industry, the survey suggests that consumers are looking for freedom of choice • 91% of existing e-reader/tablet owners say that the ability to buy content from more than one store would encourage them to buy more 2

Survey conducted in March 2010 12,717 respondents from top 14 markets participated in the survey Finland (n=696) Norway (n=697) China Germany (n=989) (n=813) UK (n=992) Italy (n=979) Japan USA (n=978) (n=982) Spain (n=983) S. Korea Austria (n=979) (n=697) France India (n=986) (n=959) Australia (n=988) Note: All are web users; all are print magazine, newspaper and/or book consumers Source: BCG e-reader survey (N=12,717, March 2010) 3

Already very high awareness of e-readers/tablets Over 50% of US consumers somewhat or extremely familiar Not heard of them Heard of them Somewhat familiar with them How aware are you of e-readers/tablets? Extremely familiar with them (% of respondents) Own one 6 2 7 5 6 9 12 12 10 11 10 15 14 24 23 31 30 39 44 42 44 47 46 53 56 62 33 65 22 54 41 34 29 18 27 32 27 25 19 34 36 22 22 26 18 17 16 19 15 11 13 9 10 7 4 4 3 4 2 3 2 2 2 2 2 2 3 0 4 2 India China Japan US Korea Italy Germany UK Australia Austria France Spain Finland Norway Source: BCG e-reader survey (N=12,717, March 2010) 4

Very strong intent to purchase over the next 1-3 years, especially for multi-purpose tablets ~30-50% intend to ~50-75% intend to Strong preference for purchase in next year purchase within 3 years multi-purpose tablets How interested are you in purchasing How interested are you in purchasing What kind of a digital reading device would you like to an e-reader/tablet within 1 year? an e-reader/tablet within 3 years? own? WW median WW median 73% 73% US US 66% 57% 53% 51% 47% 49% 39% 28% 29% 24% Overall1 Already Overall1 Already Single-purpose Multi-purpose tablets familiar1 familiar1 e-readers (e.g. (e.g. Apple iPad)3 Amazon Kindle, Sony Reader)2 1. This excludes those who already own e-readers, 2. Single-purpose e-readers are specifically designed to support electronic versions of books, magazines and/or newspapers, 3. mutli- purpose tablets support internet access, emails, photos, audios, videos (TV/movie) besides digital books, magazines and/or newspapers. Source: BCG e-reader survey (N=12,717, March 2010) 5

US consumers willing to pay ~$100-150 for single-purpose e-readers and ~$130-200 for multi-purpose tablets Single-purpose e-readers (e.g. Amazon Kindle) Willingness to pay for e-readers/tablets Multi-purpose tablets (e.g. Apple iPad) ($) Applie iPad: $499~$829 500 Sony Reader Touch: $299 300 Amazon Kindle, B&N Nook: $259 200 Sony Reader Pocket: $169 100 0 Norway Italy Australia Austria Finland Korea Germany UK Japan France US Spain China India Single-purpose ($) Inexpensive 150 130 120 130 70 90 130 110 110 130 100 130 70 60 Expensive 200 260 180 200 130 170 160 150 190 150 150 160 120 90 Multi-purpose ($) Inexpensive 220 190 180 190 130 140 150 150 110 150 130 130 120 110 Expensive 340 330 280 270 270 260 230 230 220 220 200 200 210 160 Note: Among people who currently own e-readers or who are aware of e-readers and are interested in purchasing an e-reader within 3 years, `Van Westendorp's Price Sensitivity Meter method was used to calculate the optimal price Source: BCG e-reader survey (N=12,717, March 2010), company websites 6

Consumers primarily interested in using e-readers/tablets to access books, magazines and newspapers ~70-100% of potential e- ~30-90% of e-reader owners currently read digital publications and 65% reader/tablet users expect to read want to read other magazines and/or newspapers in future digital publications % of e-reader owners who currently or % of e-reader owners who want to read % of those interested in purchasing an periodically read... other magazines and/or newspapers e-reader/tablet within 3 years, would you expect to read ...? % strongly agree/agree 76 93 100 Digital books Digital books 89 97 80 65 64 45 84 Digital magazines 60 Digital magazines 50 82 40 36 82 Digital newspapers 20 Digital newspapers 34 73 0 0 50 100 WW median US 0 50 100 WW median (%) WW median (%) US US Source: BCG e-reader survey (N=12,717, March 2010), BCG analysis 7

Consumers are willing to pay relatively attractive prices for content on e-readers/tablets ($) 20 Willingness to pay for a digital book on e-readers/tablets 17 15 13 13 13 13 12 12 12 10 9 Kindle book bestsellers: $9.99 10 6 5 4 8 7 3 2 7 7 7 7 7 7 5 6 3 3 2 0 1 Norway Italy Spain Austria Finland Germany France Australia US UK Japan Korea India China ($) 8 Willingness to pay for a single copy of digital magazine on e-readers/tablets 7 6 5 5 5 5 4 4 4 4 3 3 3 3 Newsweek Kindle: $1.99 2 2 4 3 1 3 3 3 3 2 3 2 2 1 1 1 1 0 Finland Italy Spain Japan Norway France US Australia Korea UK Germany Austria China India ($) 20 19 Willingness to pay for a monthly subscription to a digital newspaper on e-readers/tablets1 15 WSJ Kindle: $14.99 15 14 13 13 12 12 USA Today Kindle: $11.99 11 10 10 8 7 12 11 5 7 8 7 5 7 5 2 2 5 5 4 0 1 1 Spain Italy UK France Australia Germany Austria Japan US Norway Korea China India 1. The result of the Finland survey not included. Note: Among people who currently own e-readers or who are aware of e-readers and are interested in purchasing an e-reader within 3 year, `Van Westendorp's Price Sensitivity Meter method was used to calculate the optimal price, Source: BCG e-reader survey (N=12,717, March 2010), company websites 8

Besides digital publications, consumers interested in web access, email and video on their e-readers/tablets Majority of single-purpose e-reader owners 1 Web, email and video are key content for and potential users1 are interested in web, multi-purpose tablets video and other entertainment What other content would you expect to use What would drive you to increase the usage of e- on your tablet? readers/tablets? Of those interested in purchasing Of those interested in purchasing WW median Of e-reader single-purpose e-readers/tablets multi-purpose tablets within 3 years US owners (%2) within 3 years (%2) (%) 84 Web browser 90 64 65 81 Enhanced web access Email 86 64 71 73 Video (TV / movie) 74 60 59 65 Ability to purchase and Music 65 watch videos (TV/movies) 62 66 56 User-generated content 60 62 57 61 Ability to play songs, video Personal photo 58 games and other entertainment 51 68 43 Video game 45 WW median E-readers/tablets will become first truly converged device US 1. Those interested in purchasing e-readers within 3 years, 2. Strongly likely/likely (%) Source: BCG e-reader survey (N=12,717, March 2010), BCG analysis 9

Convenience is the major driver of e-reader/tablet usage Marked preference for accessing content from multiple sources The U.S. survey Of those interested in reading digital books/magazines/newspapers on e- readers/tablets, what is the primary reason? Of those interested in purchasing e- Of e-reader owners (%) readers/tablets within 3 years (%) 28 16 Convenience of purchase 35 16 30 12 21 36 Not carrying around heavy print copies 13 23 21 26 18 15 23 Convenience of delivery 13 15 28 14 6 Price 20 11 17 6 9 ConvenienceEase of saving the content 5 11 10 8 4 2 Digital books Screen quality of e-reader 5 1 2 2 3 9 12 Digital magazines Better for the environment 8 17 Digital newspapers 2 3 1 Durability 5 3 0 What would drive you to increase the usage of e-readers/tablets? (%) Strongly likely / likely (%) Strongly likely / likely (%) Ability to purchase the content from different 91 83 retailers, not being committed to a single one Greater selection of books, 72 84 newspapers, and/or newspapers Consumers would favor the more "open" models Source: BCG e-reader survey (N=12,717, March 2010), BCG analysis 10

Summary of the survey methodology and sample Description of survey methodology Sample composition (N=12,717 in 14 countries) BCG conducted a proprietary Sample distribution • All are web users multi-country survey about e- 12,717 reader/tablet consumption • All are readers of print books, US 978 US magazines and/or newspapers 992 UK The survey was conducted from March 8 to 19, 2010, via the web 986 France • 50% men, 50% women 978 Italy Research Now managed the Europe 983 • Located in all regions in each Spain online field work and survey country, except process 989 Germany • Australia focusing on Melbourne and 697 Austria Sydney 697 Norway • S. Korea focusing on Seoul, 696 Incheon, Gyeonggi-do, Gwangju, Finland Busan, Daegu, Daejeon 988 Australia • China focusing on Beijing, Shanghai, Guangzhou, Chengdu Asia Pacific 982 Japan • India focusing on New Delhi, 979 Korea Mumbai, Chennai, Bangalore 813 China 959 India Source: BCG e-reader survey (N=12,717, March 2010) 11

Boston Consulting Group Survey on E-Readers and Tablets_Key Findings_2010

by Dave Fondiller on May 15, 2010

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