www.pwc.co.za/outlook

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

www.pwc.co.za/outlook

Consumer/end-user & advertising spending

5 year historic & 5 year forecast data

3 countries

12 segments

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The global view

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CAGR 1.1%

Consumer books

Growth in digital > Growth in print

Revenues print > Revenues digital

PwC

The global digital view

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Consumer books 14% 29%

Educational books 7% 14%

Professional books 18% 35%

PwC

The global growth view

Cumulative Average Growth Rate (%) 2014 – 2018

Consumer books total

Consumer books print

Consumer books digital

Educational books total

Educational books print

Educational books digital

Professional books total

Professional books print

Professional books digital

Series1 0.009 -0.031 0.176 0.007 -0.009 0.161 0.023 -0.026 0.172

-2.5%

2.5%

7.5%

12.5%

17.5%

TotalCAGR1.1%

1 2

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The local view

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Educational books

Growth in digital > Growth in print

Revenues print > Revenues digital

CAGR 0.5%

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The local digital view

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Consumer books 2% 9%

Educational books 0.09% 0.23%

Professional books 7% 14%

Overall 2% 9%

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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

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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 2009

• 5.4% in 2013

• 3.1% in 2018

PwC Inc

The connected consumer

2013

1.7 million active tablet

devices

19.9 million smartphone connections

2018

5.1 million active tablet

devices

48.4 million smartphone connections

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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%.

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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

2014

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2018

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Inhibitors of growth

Slow down in e-reader sales

Rising tablet penetration

Government legislationVAT

2018

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2014

Piracy

Post literate society

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CEO perspective: Entertainment and Media

PwC 18th 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).

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Slide 16PwC Inc

Advancing from a digital strategy – to a business strategy fit for a digital age

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

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Digital success is not just about technology. It’s about applying a digital mindset to build the right behaviours

Forging trust

Creating the confidence to move with speed and agility

Empowering innovation

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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

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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?

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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

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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

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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?

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Slide 22PwC 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.

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Questions?