January 2015

US CHILDREN’S BOOK MARKET

JONATHAN NOWELL

NIELSEN BOOK PRESIDENT

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AGENDA

Children’s book sales around the world

US children’s Book market

Our big opportunities

… and a challenge

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6.3% 7.6%

-0.1%-1.8%

7.8%

8.1%

12.8%

-2.4%

1.6%

CHILDREN’S BOOK SALES AROUND THE WORLDGlobal growth in Children’s print book market

28.0%*

*Brazil data based on Quarter 3-5 2013 vs Quarter 3-5 2014

9.9%

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2013: THE BEST YEAR TO DATE?

0

50

100

150

200

250

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Mill

ion

s Juvenile 2004 – 2013 CAGR: 4%

Source: Bookscan

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2014 WAS EVEN BETTER

Source: Bookscan

Physical Unit Sales in Juvenile Books

12.8% Growth

200226

0

50

100

150

200

250

2013 2014

Mill

ion

s

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JUVENILE’S BESTSELLERS HAVE GOTTEN BIGGER

Overall Bestsellers 2013 (All Categories)

# Title Author Imprint Pub Date 2013 Sales

1 HARD LUCK KINNEY JEFF AMULET BOOKS 11/1/2013 1,825,931

2 INFERNO BROWN DAN DOUBLEDAY BOOKS 5/1/2013 1,400,835

3 KILLING JESUS: A HISTORY O'REILLY BILL HENRY HOLT & COMPANY 9/1/2013 1,111,271

4 PROOF OF HEAVEN: A NEUROSURGEO ALEXANDER EBEN SIMON & SCHUSTER 10/1/2012 935,998

5 THE HOUSE OF HADES RIORDAN RICK DISNEY PRESS 10/1/2013 926,059

6 DIVERGENT ROTH VERONICA KATHERINE TEGEN BOOKS 2/1/2012 829,770

7 JESUS CALLING: ENJOYING PEACE YOUNG SARAH THOMAS NELSON PUB 10/1/2004 828,531

8 SYCAMORE ROW GRISHAM JOHN DOUBLEDAY BOOKS 10/1/2013 700,241

9 THE THIRD WHEEL KINNEY JEFF AMULET BOOKS 11/1/2012 667,330

10 HAPPY, HAPPY, HAPPY: MY LIFE A ROBERTSON PHIL HOWARD BOOKS 5/1/2013 651,395

11 ALLEGIANT ROTH VERONICA KATHERINE TEGEN BOOKS 10/1/2013 646,482

12 LEAN IN: WOMEN, WORK, AND THE SANDBERG SHERYL KNOPF PUBLISHING GROUP 3/1/2013 628,776

13 THE FAULT IN OUR STARS GREEN JOHN DUTTON BOOKS 1/1/2012 628,005

14 THINGS THAT MATTER: THREE DECA KRAUTHAMMER C CROWN FORUM 10/1/2013 600,557

15 DOCTOR SLEEP KING STEPHEN SCRIBNER BOOK COMPANY 9/1/2013 564,956

16 THE GREAT GATSBY FITZGERALD F. SC SCRIBNER BOOK COMPANY 10/1/2004 564,630

17 AND THE MOUNTAINS ECHOED HOSSEINI KHALED RIVERHEAD BOOKS 5/1/2013 561,023

18 FIFTY SHADES OF GREY JAMES E. L. VINTAGE BOOKS 4/1/2012 558,046

19 SI-COLOGY 1: TALES AND WISDOM ROBERTSON SI HOWARD BOOKS 9/1/2013 542,219

20 STRENGTHS FINDER 2.0: A NEW AN RATH TOM GALLUP PRESS 2/1/2007 537,987

Source: Bookscan

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BIGGER AND BIGGEROverall Bestsellers 2014 YTD Thru 11/23/2014 (All Categories)

# Title Author Imprint Pub Date YTD Sales

1 THE FAULT IN OUR STARS GREEN JOHN SPEAK 4/1/2014 1,708,169

2 DIVERGENT ROTH VERONICA KATHERINE TEGEN BOOKS 2/1/2012 1,399,710

3 INSURGENT ROTH VERONICA KATHERINE TEGEN BOOKS 5/1/2012 1,240,220

4 ALLEGIANT ROTH VERONICA KATHERINE TEGEN BOOKS 10/1/2013 1,083,885

5 THE FAULT IN OUR STARS GREEN JOHN SPEAK 4/1/2014 892,687

6 GONE GIRL FLYNN GILLIAN BROADWAY BOOKS 4/1/2014 846,624

7 THE FAULT IN OUR STARS GREEN JOHN DUTTON JUVENILE 1/1/2012 781,042

8 THE LONG HAUL KINNEY JEFF AMULET BOOKS 11/1/2014 699,928

9 KILLING PATTON: THE STRANGE DE O'REILLY BILL HENRY HOLT & COMPANY 9/1/2014 685,187

10 LOOKING FOR ALASKA GREEN JOHN SPEAK 1/1/2007 661,012

11 IF I STAY FORMAN GAYLE SPEAK 4/1/2010 651,264

12 FROZEN SAXON VICTORIA RANDOM HOUSE DISNEY 10/1/2013 600,279

13 MINECRAFT: REDSTONE HANDBOOK: SCHOLASTIC INC. SCHOLASTIC INC. 4/1/2014 597,286

14 THE MAZE RUNNER DASHNER JAMES DELACORTE PRESS BOOKS FOR Y 8/1/2010 588,701

15 MINECRAFT: ESSENTIAL HANDBOOK: SCHOLASTIC INC. SCHOLASTIC INC. 11/1/2013 577,180

16 JESUS CALLING: ENJOYING PEACE YOUNG SARAH THOMAS NELSON PUBLISHERS 10/1/2004 570,855

17 FOUR ROTH VERONICA KATHERINE TEGEN BOOKS 7/1/2014 552,728

18 FROZEN: JOURNEY TO THE ICE PAL BERRIOS FRANK RANDOM HOUSE DISNEY 10/1/2013 543,710

19 HARD LUCK KINNEY JEFF AMULET BOOKS 11/1/2013 512,219

20 FROZEN: BIG SNOWMAN, LITTLE SN RABE TISH RANDOM HOUSE DISNEY 10/1/2013 492,822

Source: Bookscan

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JUVENILE’S GROWTH IS DRIVING THE INDUSTRY

Overall US Physical Book Market 2012-2014

0

100

200

300

400

500

600

700

2012 2013 2014

Mill

ion

s

Adult Non-Fiction Adult Fiction Juvenile Fiction Juvenile Non-Fiction Other

CAGR: 13%

CAGR: -3%

CAGR: 11%

CAGR: -2%

CAGR: 2%

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SHIFTS IN WHERE CHILDREN’S BOOKS ARE BOUGHT

0%

5%

10%

15%

20%

25%

30%

35%

2009 2010 2011 2012 2013 1H 2014

Book clubs/Fairs

E-tailers

Chain Bookstores

Indie Bookstores

Mass Merch

Consumer Survey Responses – Location of Book Purchases

Source: Nielsen Books & Consumer US, 2009-2014, excludes YA.

OPPORTUNITIES

Growth Opportunities

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TABLET USAGE BY CHILDREN’S BUYERS

Source: Nielsen Books & Consumer US, 2011 through August2014

Which of the following devices do you own?

0%

10%

20%

30%

40%

50%

60%

70%

Q 12011

Q 22011

Q 32011

Q 42011

Q 12012

Q 22012

Q 32012

Q 42012

Q 12013

Q 22013

Q 32013

Q 42013

Q 12014

Q 22014

Q 32014

TABLET

SMARTPHONE

EREADER

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19%

29%30%

13%

7%

2%3%

9%

26%

29%

25%

7%

0%

5%

10%

15%

20%

25%

30%

35%

1 - 2 3 - 4 5 - 6 7 - 8 9 - 10 11 - 12

Child 0-6 Child 7-12

Mean: 4.84 Mean: 7.19

CHILDREN ARE STARTING TO READ E-BOOKS YOUNGER

Source: Nielsen Children’s Deep Dive US, Fall 2014

At What Age Did Your Child Start Reading eBooks?

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SO CHILDREN’S E-BOOK SALES INCREASING …

Source: Nielsen Books & Consumer US, 2014 thru June

OF CHILDREN'S BOOKS PURCHASED ARE E-BOOKS

21%

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Source: Nielsen Books & Consumer US, 2011 thru June 2014.

AND GROWING AT A HEALTHY PACE

E-book % Share of Children's Books Purchased

7%15% 14%

21%

93%85% 86%

79%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2011 2012 2013 1H 2014

Ebooks Physical

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BUT PRINT BOOKS ARE IMPORTANT

Source: Nielsen Children’s Deep Dive US, Fall 2014

How important are the following media?

4.0

4.0

4.3

3.9

4.4

4.6

4.8

4.9

5.3

5.1

5.8

5.6

7.2

5.1

5.3

5.0

5.7

5.2

5.3

5.3

5.4

5.7

5.9

5.6

6.1

7.0

- 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0

Handheld games

Online games

Kid-specific social networks like Club Penguin or…

Video game systems

eBooks

Mobile apps

Children's magazines

Video streaming services such as Hulu or Netflix

Board games

Cable or broadcast television

Children's DVDs

Educational Websites

Print books

7 or older

6 and under

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Source: Bookscan

PHYSICAL FORMATS ARE GROWING, BUT

BOARD BOOKS SOAR

Children’s Physical Sales by Format Q4 2013 – Q3 2014

-

20

40

60

80

100

120

140

Trade Paperback Hardcover Board Book Boxed Set MM Paperback Other

Mill

ion

s

2011-2012

2012-2013

2013-2014

22% CAGR

9% CAGR

9% CAGR

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JUVENILE FICTION BY SUB-CATEGORY

Source: Bookscan

-

5

10

15

20

25

HumorousStories

Fantasy &Magic

Social Issues Action &Adventure

Media Tie-In Classics Animals Holidays &Celebrations

Concepts Dystopian ScienceFiction

Mill

ion

s

2011-2012

2012-2013

2013-2014

Unit Volume by BISAC Category Q4 2011 – Q3 2014

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JUVENILE NON-FICTION BY SUB-CATEGORY

Source: Bookscan

Unit Volume by BISAC Category Q4 2011 – Q3 2014

-

1

2

3

4

5

6

7

8

ActivityBooks

Animals Biography& Auto

Games &Activities

Concepts Science &Nature

Religion History Study Aids LanguageArts

Mill

ion

s

2011-2012

2012-2013

2013-2014

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Magic Tree Housein JNF History

POPULAR BRANDS PERMEATE MANY CATEGORIES

Star Wars in JNF Crafts and Hobbies

Disney Princesses in JNF Cooking

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CHARACTERISTICS OF JNF BUYERS

Source: Nielsen Books and Consumers, 2013 and 2014 thru May per PubTrack Books and Consumers. Survey does not include buyers less than 13 years of age. Percentages reflect % share of JNF Buyers, Indices are % JNF/ % all US book buyers * 100

42%

13% 13%

33%29%

No Children Any Children <3 Yrs Any Children 3-5 Any Children 6-12 Any Children 13-17

Approximately 27% of JNF books purchased are by adults with no children and not as gifts.

15% OF JNF BOOKS PURCHASED WERE GIFTS

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Source: Bookscan

THE RISE OF YOUNG ADULT BESTSELLERS

# Title Author Imprint Pub Date 2011

1 THE HUNGER GAMES COLLINS SUZANNE SCHOLASTIC PRESS 7/1/2010 1,577,952

2 DIARY OF A WIMPY KID 6: CABIN KINNEY JEFF ABRAMS 11/1/2011 1,563,302

3 CATCHING FIRE COLLINS SUZANNE SCHOLASTIC PRESS 9/1/2009 985,174

4 INHERITANCE PAOLINI CHRISTOPHER ALFRED A. KNOPF BOOKS FOR YOUN 11/1/2011 900,145

5 MOCKINGJAY COLLINS SUZANNE SCHOLASTIC PRESS 8/1/2010 853,314

6 THE SON OF NEPTUNE BK 02 RIORDAN RICK HYPERION BOOKS 10/1/2011 698,563

7 THE KANE CHRONICLES, THE, BOOK RIORDAN RICK HYPERION BOOKS 5/1/2011 534,605

8 THE UGLY TRUTH KINNEY JEFF AMULET BOOKS 11/1/2010 523,966

9 ELF ON THE SHELF AEBERSOLD CAROL V. CCA & B 12/1/2006 499,568

10 THE WIMPY KID DO-IT-YOURSELF B KINNEY JEFF AMULET BOOKS 5/1/2011 487,814

11 RODRICK RULES KINNEY JEFF AMULET BOOKS 2/1/2008 338,324

12 GOODNIGHT MOON BROWN MARGARET WISE HARPERFESTIVAL 8/1/1991 329,107

13 DIARY OF A WIMPY KID KINNEY JEFF AMULET BOOKS 4/1/2007 309,087

14 THE HEROES OF OLYMPUS, THE, BO RIORDAN RICK HYPERION BOOKS 10/1/2010 294,421

15 DIARY OF A WIMPY KID: THE LAST KINNEY JEFF AMULET BOOKS 1/1/2009 288,874

16 AWAKENED CAST P. C. ST. MARTIN'S GRIFFIN 1/1/2011 285,412

17 GREEN EGGS AND HAM: 50TH ANNIV DR SEUSS RANDOM HOUSE CHILDREN'S BOOKS 8/1/1960 282,374

18 DIARY OF A WIMPY KID #4 - DOG KINNEY JEFF ABRAMS 10/1/2009 273,985

19 OH, THE PLACES YOU'LL GO! DR SEUSS RANDOM HOUSE CHILDREN'S BOOKS 1/1/1990 261,923

20 THE HUNGER GAMES TRILOGY BOXED COLLINS SUZANNE SCHOLASTIC PRESS 8/1/2010 254,560

Top 20 Juvenile Titles – 2011

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Source: Bookscan

THE RISE OF YOUNG ADULT BESTSELLERSTop 20 Juvenile Titles – YTD thru Week 48 2014

# Title Author Imprint Pub Date YTD Sales

1 THE FAULT IN OUR STARS GREEN JOHN SPEAK 4/1/2014 1,732,157

2 DIVERGENT ROTH VERONICA KATHERINE TEGEN BOOKS 2/1/2012 1,403,653

3 INSURGENT ROTH VERONICA KATHERINE TEGEN BOOKS 5/1/2012 1,249,813

4 ALLEGIANT ROTH VERONICA KATHERINE TEGEN BOOKS 10/1/2013 1,092,487

5 THE LONG HAUL KINNEY JEFF AMULET BOOKS 11/1/2014 921,742

6 THE FAULT IN OUR STARS GREEN JOHN SPEAK 4/1/2014 897,941

7 THE FAULT IN OUR STARS GREEN JOHN DUTTON JUVENILE 1/1/2012 783,135

8 LOOKING FOR ALASKA GREEN JOHN SPEAK 1/1/2007 672,344

9 IF I STAY FORMAN GAYLE SPEAK 4/1/2010 667,870

10 FROZEN SAXON VICTORIA RANDOM HOUSE DISNEY 10/1/2013 629,080

11 MINECRAFT: REDSTONE HANDBOOK: SCHOLASTIC INC. SCHOLASTIC INC. 4/1/2014 612,832

12 THE MAZE RUNNER DASHNER JAMES DELACORTE PRESS BOOKS FOR YOUN 8/1/2010 601,700

13 MINECRAFT: ESSENTIAL HANDBOOK: SCHOLASTIC INC. SCHOLASTIC INC. 11/1/2013 594,709

14 FOUR ROTH VERONICA KATHERINE TEGEN BOOKS 7/1/2014 567,431

15 FROZEN: JOURNEY TO THE ICE PAL BERRIOS FRANK RANDOM HOUSE DISNEY 10/1/2013 564,756

16 HARD LUCK KINNEY JEFF AMULET BOOKS 11/1/2013 525,303

17 FROZEN: BIG SNOWMAN, LITTLE SN RABE TISH RANDOM HOUSE DISNEY 10/1/2013 511,098

18 PAPER TOWNS GREEN JOHN SPEAK 9/1/2009 504,535

19 FROZEN: A TALE OF TWO SISTERS LAGONEGRO MELISSA RANDOM HOUSE DISNEY 10/1/2013 486,328

20 FROZEN: THE JUNIOR NOVELIZATIO NATHAN SARAH RANDOM HOUSE DISNEY 10/1/2013 455,842

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THE RISE OF YOUNG ADULT BESTSELLERS

Count of YA ISBNs in Bookscan Juvenile Bestselling Top 20 –2006 thru 2014

Source: Bookscan

0

2

4

6

8

10

12

2006 2007 2008 2009 2010 2011 2012 2013 2014

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OF YOUNG ADULT BOOKS AREBOUGHT BY ADULTS FOR THEMSELVES

80%Y A

ADULTS ARE HEAVY YA READERS

Source: Nielsen Books & Consumer US, Spring 2014.

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TEENS THAT READ FOR FUN

Source: Nielsen Children’s Deep Dive US, Fall2014

79% 81%78%

70%

59%62%

66%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Fall 11 Spring 12 Fall 12 Spring 13 Fall 13 Spring 14 Fall '14

Read for fun

On the rise after a dip in 2013

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6%

15%

29%

34%

17%

6%

15%

30%31%

19%

6%

12%

28%30%

24%

0%

5%

10%

15%

20%

25%

30%

35%

40%

I strongly prefer eBooks I generally prefereBooks

I have no preference I generally prefer print,books but are open to

eBooks

I strongly prefer printbooks

Fall 13 Spring 14 Fall 14

WHAT FORMAT DO TEENS PREFER?

Source: Nielsen Children’s Deep Dive US, Fall 2013-Fall 2014.

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UK 34%

Children's

Other genre

CHILDREN’S SHARE OF OVERALL PRINT BOOK MARKET

US 37%

Children's/Juvenile

Other genre

China 18%

Children's

Other genre

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FROM ONLINE STARDOM TO RECORD BOOK SALESEngaging teen readers through YouTube stars

Nielsen BookScan/YouTube/Nielsen Books & Consumers UK

6.6million subscribers90k copies globally in debut week

3.4million subscribers163k copies YTD

63% of book-buyers aged 16-19 in the UK are active YouTube

users.

UPCOMING

3.6millionsubscribers

6.4millionsubscribers

4.1millionsubscribers

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WHERE DO BOOKS RANK FOR DIFFERENT AGE GROUPS?

Base: all 0-17s Weekly participation; with exception of YouTube, images are examples to illustrate type of activity, e.g. football represents sport

14-175-7 8-10 11-130-4

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KEY TAKEAWAYS

• Children’s is doing GREAT

• Growth is driven by many different areas and strategies

• YA Series & Media tie-ins upending traditional patterns

• Some growth driven by adult consumers “for self”

• Child is THE MOST important influencer

• Rights growth in China

• Traditional wisdom no longer applies

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OUR BIGGEST CHALLENGE IS …

Base: all 0-17s Weekly participation; with exception of YouTube, images are examples to illustrate type of activity, e.g. football represents sport

14-1711-13

jonathan.nowell@nielsen.com