Perspective on the road to digital for the book publishing industry Elenor Jensen PwC 18 March 2015

PwC Internet access spending and advertising TV subscriptions, license fees and advertising Filmed entertainment Radio Music Consumer magazine publishing Newspaper publishing Consumer and educational book publishing Business-to-business publishing Out-of-home advertising Video games Sport Consumer/end- user & advertising spending 5 year historic & 5 year forecast data 3 countries 12 segments 2

PwC The global view 3 CAGR 1.1% Consumer books Growth in digital > Growth in print Revenues print > Revenues digital

PwC The global digital view 4 Consumer books 14%29% Educational books 7%14% Professional books 18%35%

PwC The global growth view Cumulative Average Growth Rate (%) 2014 – 2018 Total CAGR 1.1% 1 2 5

PwC The local view 6 Educational books Growth in digital > Growth in print Revenues print > Revenues digital CAGR 0.5%

PwC The local digital view 7 Consumer books 2%9% Educational books 0.09%0.23% Professional books 7%14% Overall 2%9%

PwC Consumer books Positive growth Growth of 2.5% is expected for the segment. Print is expected to grow by 1% and digital by 34.5%. Digital is taking a larger share of the pie Digital revenues will increase from 2% to 9% of total consumer book revenues. Increase in market share in books segment The market share of consumer books will increase from 38% to 42%. 8

PwC Books are competing for the consumers rands… Connected consumers have access to various E&M products on 1 device. % of Total spending on books as a % of the total E&M market is expected to decline : 8.9% in % in % in

PwC Inc The connected consumer million active tablet devices 19.9 million smartphone connections million active tablet devices 48.4 million smartphone connections 10

PwC Inc Educational books Negative growth Growth of -1% is expected for the segment. Print is expected to grow by -1.1% and digital by 25.2%. Digital is growing marginally Digital revenues will increase from 0.09% to 0.23% of total educational book revenues. Decrease in market share in books segment The market share of consumer books will decrease from 58% to 53%. 11

PwC Inc Professional books Positive growth Growth of 2.8% is expected for the segment. Print is expected to grow by 1.2% and digital by 17.4%. Digital is taking a larger share of the pie Digital revenues will increase from 7% to 14% of total consumer book revenues. Marginal increase in market share in books segment The market share of professional books will increase from 4% to 5%. 12

PwC Inc Growth drivers Strategic joint ventures / alliances Increase in tablet penetration Rising literacy, income and urbanisation levels Self-publishing phenomenon Interactive text books

PwC Inc Inhibitors of growth Slow down in e-reader sales Rising tablet penetration Government legislation VAT Piracy Post literate society 14

PwC Inc CEO perspective: Entertainment and Media PwC 18 th Annual Global CEO Survey 75% of E&M CEOs are concerned about shifts in consumer spending and behaviour 68% of entertainment and media CEOs plan to enter into a new strategic alliance or joint venture over the next year, that is higher than last year, and also 17% higher than in most other industries. E&M CEO’s are more likely than their counterparts in other industries to consider partnering with a competitor ( 34% vs 23% overall). 15

PwC Inc Advancing from a digital strategy – to a business strategy fit for a digital age 16

PwC Inc Advancing from a digital strategy – to a business strategy fit for a digital age An embedded digital culture that drives ever closer to the consumer Not just digital strategy, but business strategy focused on relationship innovation Putting the consumer at the center of their own world Relevancy: now a target across all industries demanding operational innovation 17

PwC Inc Digital success is not just about technology. It’s about applying a digital mindset to build the right behaviours Forging trustCreating the confidence to move with speed and agilityEmpowering innovation 18

PwC Inc Sure, innovation is key: but what does it take to be truly innovative? Product and service innovation is the core of the growth strategy for many entertainment and media companies, especially traditional players But to be truly innovative you need a ‘learning capability’ that’s embedded throughout the enterprise, and enables wider innovation in areas from business models to metrics Fostering and driving diversity and knowledge sharing across all levels are pivotal to an organisation’s ability to build this capability 15-second download How much freedom do you give your people to innovate, experiment and fail? How do you encourage, foster and drive collaboration and sharing of knowledge and information between the topmost levels of the business and the rest of the workforce? 19

PwC Inc Friend, enemy or frenemy? Welcome to the era of agile collaboration Does your business have a large number of collaborative relationships that could be consolidated into a larger and more productive one that’s easier and cheaper to manage? What market changes could happen that might transform the benefits from the collaboration on the upside – or, on the downside, see them disappear overnight? Collaborations—brought on by rapid change & globalisation—have moved beyond cost savings to driving revenue-generating innovation as a goal A diverse array of collaborations exist, ranging from partnerships between complementary players to co-opetitive alliances between ‘frenemies’ The key to successful collaboration lies in creating a structure that will not only deliver the targeted value, but also has the agility to flex and permit new strategic options as conditions change 15-second download 20

PwC Inc Time to look to adjacent industries for new talent – and new ways to keep it on board Entertainment and media companies can no longer rely on their industry’s ‘cool’ employer brand to win over and keep the talent they need The rising importance of data means they must now recruit and absorb new technical and analytics skill sets—people who are likely to have a different mindset and cultural expectations To succeed, businesses need to look to adjacent industries not just for talent – but also for the right HR strategies and employee perks to keep that new talent happy, engaged and integrated 15-second download How clear a view does your business have of the gap between its current and future talent needs? What induction and retention strategies do you use to help new people integrate socially into the workforce? 21

PwC Inc A business strategy fit for a digital age…. Digital success is not just about technology. It’s about applying a digital mindset to build the right behaviours. The “audience of one” can become a reality across every experience. 22

PwC Inc Questions? 23