The A.T. Kearney-Bookrepublic's research about the International Digital Publishing Market

1. Reading Digital: Where Are We? Where Are We Going?
Do Readers Dream of Electronic Books?
Presentation for the IfBookThen 2012 Conference
Milan, February 2nd 2012
Giovanni Bonfanti (A.T. Kearney), Edoardo Bottai (A.T. Kearney), Marco Ferrario (BookRepublic)

2. Preface
Objective
■ Provide an overview of digital publishing in Europe, Asia, South America and
North America, highlighting the primary differences and emerging trends
Approach
■ We’ve surveyed countries that cover 80% of the global book market
■ All the numbers presented for 2011 derive from:
• 40 interviews with key players (publishers, retailers…) from major markets1
• Analysis of public data from public sources / press search
■ This is an ongoing research project that debuted at IfBookThen 2011 and was
presented in Frankfurt (Publisher’s launch); London (Futurebook) and New York
(DBW)
All the analysis presented in these pages are a summary of a larger research
that was developed as a joint effort of A.T. Kearney and Bookrepublic
1. EU: UK, France, Spain, Germany, Italy, Denmark, Sweden, Norway, Netherlands; North America: US, Canada; South America: Brazil, Mexico, Argentina;
Asia: Japan, India, China, Australia, South Korea A.T. Kearney 2

3. eBook market size is ~€2.4 Bn – Europe is third largest region
eBook Trade Market Size Regional eBook Market
(mln€; 2011E) Share by Country
1900-2000 • U.S.: 98%
• Canada: 2%
• UK: 52%
• Germany: 28%
• South Korea: 45% • France: 7%
• Japan: 25%
• Italy: 3%
• China: 25%
• Spain: <2%
• Other: ~5%
• Other: ~8%
• Brazil: 40% - 50%
250-270
170-180
1
North America South Asia EU
America
eBook
penetration 17%-18% <0.1% 2.2%- 2.4% 1%-1.1%
Source: interview with a panel of publishers / bookretailers, press search, EUROSTA, PWC, U.S. Bureau, AAP, A.T. Kearney A.T. Kearney 3

4. Key market drivers vary by country
eBook Market Penetration 7%
(%; 2011E) <1.5%
0.9%
UK Japan
20% 0.5%
Germany
14-15%
France
0.5%
<0.5%
U.S. Italy <1%
Spain South
In US about 33% Korea
of device owners China
have eReader +
tablet
Xx% 0.9%
<0.1%
E-book penetration
Selection of countries Brazil Australia
analyzed
Drivers as of 2011 USA Brazil Australia Japan China UK Germany France Italy Spain
Availability of
titles in local 2,700,000 8,000 400,000 50,000 270,000 400,000 80,000 60,000 15,000 15,000
language
Tablet Penetration 40 0.5 0.8 2 7 2.7 2.65 1.8 0.7 0.6
(mln; %) 20% <0.5% 4% 1.6% 0.5% 4.4% 3.2% 2.9% 1.2% 1.8%
eReader 40 7.8 3.0 0.5 0.1 0.14 0.4
Penetration n.a. n.a
20% <0.1% 0.6% 4.9% 0.6% 0.2% 0.25% 0.8%
(mln; %)
A.T. Kearney 4
Source: interview with a panel of publishers / bookretailers, press search, EUROSTA, PWC, U.S. Bureau, AAP, A.T. Kearney / Bookrepublic analysis., Harris Interactive Poll, Pew Internet

5. New release eBook price is ~10€ with variation by country
Average eBook price for new releases1
(€ - average from interviews with publishers / book retailers )
15,0
14,0
 Differences in eBook
13,0
2,5 price derive from factors
2,1 12,0
like:
VAT
2,2 11,0
- Taxation (VAT)
10,9
2,4 - Difference in pricing of
Av.
9.98
1,7 1,9
(net
VAT)
9,3
“correspondent” print
book
7,5
- Legislation (ex. max
discount of print book)
12,5
11,9
Price
net
VAT
10,8
- Agency model
9,2
9,6
9,1
9,3
- Currency fluctuations
7,5
 In each country we
identified several cases of
eBook prices that differ
significantly from average
UK Ger France Spain Sweden Italy Brazil U.S.
1 Average eBook prices of new Hardcover releases A.T. Kearney 5
Source: interviews with publishers / bookretailers; A.T. Kearney / Bookrepublic analysis

6. “Traditional” factors create growth patterns
Expected penetration of eBooks after 5 years from adoption
(% of trade book sales)
20% 20% U.S. 2011
 eBook penetration grows
18% 16%-17% with varying speeds
depending on:
16% Early
Adopters
14% • UK • Technology
Penetration
• Canada “proficiency”:
• South Korea – Internet penetration
12% • …
– Mobile penetration
10% – eReader/ tablet
U.K. 2011 penetration
Second
8%
Wave – eCommerce
6%-7% • Germany penetration
6% • France
• Italy
• …
• eBook market
4%
readiness:
2% Latecomers – eBook title availability
Ger. 2011 – eBook price strategy
0.3%
1%-2% • India
0.1%
0% 0.1%
• Latin America – Taxation (VAT)
• …
1 2 3 4 5
– Big player presence
Years of adoption
Source: interview with a panel of European publishers, press research; A.T. Kearney / BookRepublic analysis A.T. Kearney 6

7. “Non traditional” drivers accelerate growth
Technological drivers The new “Digital Wheel” value chain of the
of change Publishing Industry
1
Self publishing &
digital publishing
programs 5
2
D.M.D.
4
Customer Digital Marketing &
reading behavior D.A.S. Distribution
1
3 Digital Asset Asset Value 3
Sourcing
Customer
behavior profiling
4
Ratings, reviews
(Metadata) 2
5
Social reading D.A.M.
and networking
Digital Asset Management
(Metadata sharing)
A.T. Kearney 7

8. How the drivers of change could impact the size and structure
of the book market? – The U.S. case
U.S. AAP trade book market U.S. AAP trade book market
($mln) (#)
4,1%
-­‐5,4%
222
3185 213
E-­‐book
266
3012
(8%)
28
649
+144% (13%)
72
+158%
(22%)
(32%)
E-­‐book
Paper
book
2,008
(92%)
185
1,695
-19% (87%)
-19%
(78%)
150
Paper
(68%)
book
jan - aug jan - aug jan - aug jan - aug
2010
2011 2010 2011
Source:
AAP,
Analysis
A.T.
Kearney
A.T. Kearney 8

9. How the drivers of change could impact the size and structure
of the book market? – The UK case
UK trade book market UK trade book market
(£mln) (#)
+0,5%
+5,2%
411 144 145
391 28
1
7
E-­‐book
8
+263% E-­‐book
(1%)
+560%
(7%)
(5%)
(2%)
Paper
Paper
143
book
383
384
+0,1% book
139
-3,4%
(99%)
(95%)
(98%)
(93%)
jan - jun jan - jun jan - jun jan - jun
2010
2011
2010
2011
Source:
The
Publishers
AssociaDon
Ltd,
Analysis
A.T.
Kearney
A.T. Kearney 9

10. Self-published ebooks are experiencing success in the U.S.
reducing publisher turnover by $ 70mln - $ 120mln
% of selfpublished titles in Kindle Store Self-publishing is an established trend
driven by the growth of the ebook
top 100 paid ebooks in U.S. market:
26% 26%
• in 2010, there was almost no self-
published titles in Amazon top 100 paid
22% ebooks
21%
20%
18% • in 2011, in volume terms self-published
17% books counts for 3%-5% of the total
ebook market
14% 14%
13%
• US self-publishing market size:
$ 20mln - $ 30mln
• Resulting revenue loss for publishers is
$ 70mln - $ 120mln in 20111
Apr
2011
May
Jun
2011
Jul
2011
Aug
2011
Sep
2011
Oct
2011
nov
2011
dic
2011
gen
2012
2011
Average price for self published books is 1,5$ -2 $
(range between 0,99$ and 4,99$)
1 Assuming 10$ per p-book as turnover for publishers A.T. Kearney 10
Source: Kindle Store Bestsellers archive, A.T. Kearney - BookRepublic analysis

11. A.T. Kearney is a global team of forward-thinking, collaborative partners that delivers immediate, meaningful
results and long-term transformative advantage to clients.
Since 1926, we have been trusted advisors on CEO-agenda issues to the world’s leading organizations across
all major industries and sectors. A.T. Kearney’s offices are located in major business centers in 38 countries.
Americas Atlanta Chicago Detroit Mexico City San Francisco Toronto
Calgary Dallas Houston New York São Paolo Washington, D.C.
Asia Pacific Bangkok Hong Kong Kuala Lumpur Mumbai Seoul Singapore Tokyo
Beijing Jakarta Melbourne New Delhi Shanghai Sydney
Europe Amsterdam Budapest Helsinki Ljubljana Moscow Prague Vienna
Berlin Copenhagen Istanbul London Munich Rome Warsaw
Brussels Düsseldorf Kiev Madrid Oslo Stockholm Zurich
Bucharest Frankfurt Lisbon Milan Paris Stuttgart
Middle East Abu Dhabi Johannesburg Riyadh
and Africa Dubai Manama
A.T. Kearney 11

12. About BookRepublic
• BookRepublic is one of the leading Italian eBook
stores and the front end of a system including:
• eBook distribution
• Readers community
• Metadata management
• Customer behavior profiling.
• We organize IFBOOKTHEN, an international
conference on digital publishing in Milan.
• 40K is a native digital imprint specialized in
“novelettes” and “short essays” translated in 5
languages and sold worldwide (90% of our sales
coming from US).
40K is also the digital partner of a leading national
newspaper in a “long articles” program.
• http://www.bookrepublic.it
• http://www.ifbookthen.com
• http://www.zazie.it
A.T. Kearney 12

13. Contacts
Giovanni Bonfanti Marco Ferrario
Principal CEO / Cofounder
A.T. Kearney Bookrepublic
giovanni.bonfanti@atkearney.com marco.ferrario@digitpub.it
+39 02 76295 225 +39 335 604 6861
Edoardo Bottai Marco Ghezzi
Manager COO / Cofounder
A.T. Kearney Bookrepublic
edoardo.bottai@atkearney.com marcog@bookrepublic.it
+39 02 76295 476 +39 348 22 44 836
A.T. Kearney 13