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EVOLVING MARKETSAND CONSUMER E-BOOK PURCHASING BEHAVIOUR David Walter 19 March 2013

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Copyright ©2012 The Nielsen Company. Confidential and proprietary. • Context • Consumer Confidence and International Print Book Markets • Connected devices adoption • US and Italy e-reader and tablet penetration • Manufacturer market share • The UK e-book market • E-book penetration and the rate of change • The value of the e-book and print book market • E-book pricing and the consequence for print book prices 2

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CONTEXT

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Copyright ©2012 The Nielsen Company. Confidential and proprietary. GLOBAL CONSUMER CONFIDENCE4

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CONSUMER CONFIDENCE INDEX – BOOKSCAN TERRITORIES Q4 2012 Nielsen Consumer Confidence Index 160 140 121 120 111 100 95 94 Global average = 91 89 79 76 80 65 60 46 39 40Copyright ©2012 The Nielsen Company. Confidential and proprietary. 20 0 Base : All respondents n=31972 5

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BOOKSCAN’S NINE INTERNATIONAL TERRITORIES A combined total of over 1 billion sales were measured in 2012Copyright ©2012 The Nielsen Company. Confidential and proprietary. 6

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BOOKSCAN’S NINE INTERNATIONAL TERRITORIES Only India showed year on year growth in 2012 – but the UK saw a shallow decline -7.2% -3.4% -10.3% -7.0% -9.3%Copyright ©2012 The Nielsen Company. Confidential and proprietary. 16.0% ? -6.3% -8.8% -3.7% 7

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INTERNATIONAL SECTOR TRENDS The Non-Fiction sector is seeing the sharpest declines in major territories Year-on-year volume sales change across broad sectors US UK ROICopyright ©2012 The Nielsen Company. Confidential and proprietary. IT AUS -20.0% -15.0% -10.0% -5.0% 0.0% 5.0% 10.0% Total Fiction Non Fiction Childrens 8

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THE UK E-BOOK MARKET

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Copyright ©2012 The Nielsen Company. Confidential and proprietary. 10% 12% 14% 16% 18% 20% 0% 2% 4% 6% 8% 23-Jan-11 20-Feb-11 20-Mar-11 17-Apr-11 15-May-11 Top-line overview 12-Jun-11 10-Jul-11 7-Aug-11 4-Sep-11 2-Oct-11 30-Oct-11 27-Nov-11 UK DIGITAL PENETRATION 25-Dec-11 22-Jan-12 19-Feb-12 18-Mar-12 Proportion of the UK population aged 13-79 that have bought an e-book: 2011-2012 15-Apr-12 13-May-12 10-Jun-12 8-Jul-12 5-Aug-12 2-Sep-12 30-Sep-12 28-Oct-12 25-Nov-12 23-Dec-1210

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EVOLUTION OF THE UK E-BOOK MARKET Value sales doubled year-on-year in 2012 Rolling 52-week value sales and year-on-year penetration growth 600% £180 Millions £160 500% £140 400% £120 £100 300% £80 200% £60Copyright ©2012 The Nielsen Company. Confidential and proprietary. £40 100% £20 0% £0 % Change Latest Year Previous Year 11

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UK 2012 VOLUME SALES Volume sales proportions by format Fiction Non-Fiction 8.4% 27.0% Children’s 6.5%Copyright ©2012 The Nielsen Company. Confidential and proprietary. physical books e-books 12

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UK 2012 VALUE SALES Value sales proportions by format Fiction Non-Fiction 3.9% 16.9% Children’s 4.7%Copyright ©2012 The Nielsen Company. Confidential and proprietary. physical books e-books 13

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THE UK FICTION MARKET E-books drive volume growth Fiction – 52 week rolling volume sales 120 2.4% Millions 100 80 -15.0% 60 40Copyright ©2012 The Nielsen Company. Confidential and proprietary. 20 25-Dec-11 23-Dec-12 Physical Books e-books 14

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THE UK FICTION MARKET E-books drive volume growth – but don’t deliver revenue growth Fiction – 52 week rolling value sales £600 -3.6% Millions £500 -13.4% £400 £300 £200Copyright ©2012 The Nielsen Company. Confidential and proprietary. £100 £0 25-Dec-11 23-Dec-12 Physical Books e-books 15

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E-BOOK AND PHYSICAL BOOK SELLING PRICES E-book prices have been driven down as penetration increases Rolling 52-week average selling price £7.00 £6.50 £6.00 £5.50 £2.38 £3.21 £5.00 £4.50 £4.00Copyright ©2012 The Nielsen Company. Confidential and proprietary. £3.50 £3.00 Physical Books ebooks 16

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Copyright ©2012 The Nielsen Company. Confidential and proprietary. KEY FINDINGS From our international markets, including the US, Italy and the UK • Print book markets worldwide continue to see decline • E-book sales data is not yet broadly available – consumer data helps to bridge this gap • US e-reader adoption is skewed towards an older, female demographic • Italian e-reader adoption is stronger among a younger, male demographic • In the UK e-books have rapidly taken a substantial proportion of the Fiction market, delivering volume growth – but this is not matched by revenue growth • Whilst e-books become increasingly significant for the Fiction market, the Non-Fiction and Children’s sectors have not kept up • E-book pricing is not only lower then physical books - it has been driven down as penetration has increased 17

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Copyright ©2012 The Nielsen Company. Confidential and proprietary. KEY CHALLENGES In the developing digital space • How can publishers maintain (and grow) revenue as the migration to digital brings a new pressure to deliver low prices? • How can publishers develop compelling digital content for the Non-Fiction and Children’s markets? 18

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david.walter@nielsen.com