High Level Overview of the Publishing Industry 2017

Michael Cairns
Managing Partner
Information Media Partners
Education Publishing
Market Overview: January 2017

Introduction
Michael Cairns is a publishing and media executive with over 25 years experience in
business strategy, operations and technology implementation. As a business
executive, Mr. Cairns has successfully managed several troubled and under-
performing businesses, creating new business opportunities, developing new funding
sources and enhancing shareholder value for investors. His years spent as an
operating executive have largely been with brand-name publishing companies such
as Macmillan, Inc., Berlitz International, Wolters Kluwer Health, Reed Elsevier and
R.R. Bowker. As a consultant, Mr. Cairns has worked with clients as diverse as
AARP, Hewlett Packard, InterPublic Companies and Reed Elsevier with an emphasis
on business strategy, market development and corporate development.
His skills and experience include:
 Business and corporate strategy development and implementation
 Operations management and business transformation
 Traditional and digital publishing and operations
 Print-to-digital transformation and adoption of new business models
 Software development and software services
Mr. Cairns holds an MBA (Finance) from Georgetown University and a BA from
Boston University. He has served on several boards and advisory groups including
the Association of American Publishers, Book Industry Study Group and the
International ISBN organization. Additionally, he has public and private company
board experience.
2
Michael Cairns
Strategy Consulting
New York, London, Melbourne
Tel: 908 938 4889
Michael.cairns@infomediapartners.com
Find me:
LinkedIn Twitter Blog Flickr InstaGram

Michael Cairns established Information Media Partners in 2006 as a boutique strategy
consulting firm focused on the information and education publishing segment. The work
conducted by the firm includes product development, corporate development, sales
management and corporate reorganizations. We work with established businesses, private
equity owners and potential acquirers.
Examples of our work include:
 Reorganized and re-focused a $25 million software publishing company by aligning
business operations with client priorities; implementing internal collaboration tools and
project management standards; re-building executive team to focus on effective and
efficient management
 Defined a new business strategy for a large non-profit association and advocacy group,
expanding their business model into global markets to exploit their core knowledge and
expertise across a broader market
 Led an information technology capabilities review at a large international advertising
holding company. Completed over 200 interviews in 15 international offices and multiple
group focus sessions to define the operational ‘gaps’ between existing agency capabilities
and those necessary and important for client delivery by region
 Completed a sales management effectiveness review for a global software company and
defined six key project initiatives to improve sales effectiveness, market development and
account management
We approach our client engagements in a standardized, logical manner which creates the best
environment to identify key business drivers, administrative and logistical road blocks and/or
product or market definition issues. Our investigative approach leads to better insights into
your businesses and supports the development of workable solutions and recommendations
for success.
Visit the Information Media Partners website for more information.
Sample Client List

Introduction and Agenda
 Industry Overview
 Global Trends
 Academic & Educational Publishing
 STM market
 Traditional Textbook market
 Channel Discussion
 Business Drivers & Trends
 Summary & Discussion

Agenda and Discussion Items
 An overview of the typical stm/academic ecosystem
- production, channels, business models etc. and the
typical companies at each stage
 Breakdown of typical STM income streams
 Typical hierarchy – who are the decision makers?
 Poor data/technical/other areas that present
opportunity
 Overview of Bowker/Nielsen and other data services
 Investigate business models
 Areas of strengths/weaknesses
 Opportunities: Competitors vs partners?

“Publishing” is a lot of things
Outsell:
Our industry of information,
media and technology is a
blend of fast-growing
software, services, tech
companies, moderate
growth traditional content
publishers and media. Hot
spots continue to be data-
intensive businesses and
platform solutions
providers for fully
integrated content,
software, services and
workflows on any device,
anywhere around the
world.
Source: Outsell

Together, the top six largest book markets account for
approximately 60% of the value of global publishing
USA
26%
China
12%
Germany
8%Japan
7%
France
4%
UK
3%
Other
40%
Compiled by RWCC for the International Publishers Association (IPA)

Publishing could be considered the largest segment of
the global content and entertainment industry
Publishing
30%
Movie/Entertainment
26%
Magazines
21%
Video Games
13%
Music
10%
Compiled by RWCC for the International Publishers Association (IPA)

Global ranking of top 30 publishers
Rank
(2013)
Publishing Company
(Group or Division)
Country Parent Corporation or Owner Country of Parent
2013 Revenue in
$M
2012 Revenue in
$M
1 Pearson UK Pearson UK $9,330 $9,158
2 Reed Elsevier UK/NL/US Reed Elsevier UK/NL/US $7,288 $5,934
3 Thomson-Reuters US The Woodbridge Company Ltd. Canada $5,576 $5,386
4 Wolters Kluwer NL Wolters Kluwer NL $4,920 $4,766
5 Random House Germany Bertelsmann AG Germany $3,664 $3,328
6 Hachette Livre France Lagardère France $2,851 $2,833
7 Holtzbrinck Germany Verlagsgruppe Georg von Holtzbrinck Germany $2,222 $2,220
8 Grupo Planeta Spain Grupo Planeta Spain $2,161 $2,597
9 Cengage* US Apax Partners et al. US/Canada $1,993 $1,993
10 McGraw-Hill Education US The McGraw-Hill Companies US $1,992 $2,292
11 Scholastic US Scholastic US $1,792 $2,148
12 Wiley US Wiley US $1,761 $1,783
13 De Agostini Editore* Italy Gruppo De Agostini Italy $1,724 $1,724
14 China Publishing Group China (PR) Government; partly publicly listed China (PR) $1,499 $1,104
15 Houghton Mifflin Harcourt US Houghton Mifflin Harcourt Publishing US/Caymans $1,379 $1,286
16 HarperCollins US News Corporation US $1,369 $1,189
17
Springer Science and
Business Media
Germany EQT and GIC Investors
Sweden,
Singapore
$1,301 $1,298
18 Oxford University Press UK Oxford University UK $1,254 $1,125
19 Shueisha Japan Hitotsubashi Group Japan $1,191 $1,464
20 Informa UK Informa plc UK $1,185 $1,126
21 China Education and Media China (PR) China Education and Media Group China (PR) $1,152 $702
22 Kodansha Japan Kodansha Japan $1,143 $1,368
23 Egmont Group Denmark/Norway Egmont International Holding A/S Denmark $1,101 $792
24 Grupo Santillana Spain PRISA Spain $1,020 $985
25 Shogakukan Japan Hitotsubashi Group Japan $1,011 $1,254
26 Bonnier Sweden The Bonnier Group Sweden $976 $968
27 Kadokawa Publishing Japan Kadokawa Holdings Inc. Japan $900 $1,000
28 Simon & Schuster US CBS US $809 $790
29 Klett Germany Klett Gruppe Germany $622 $604
30 Woongjin ThinkBig Korea Woongjin Holding Korea $616 $667
Source: Bookseller & Publisher’s Weekly

Top 10 publishing companies by revenue

Book publishing will remain fairly flat with professional and
educational books growing slightly faster than consumer books
0
20
40
60
80
100
120
2015 2016 2017 2018 2019 2020
Consumer and educational books revenue (US$mm, 2015-2020
Consumer Books Revenue Educational Books Revenue
Source: Global entertainment and media outlook 2016-2020, PwC

Snapshot of the US consumer market
Source: AAP, Veronis Suhler, Nielsen, Barnes & Noble

Trade book market share by format
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2008 2013 2014 2015
Other eBook Audio Paper & Mass Market Board Books Hardback
Source: AAP Annual Survey

Print continues to be the most popular format

Print consumption bounces back

E-book revenues will gain market share marginally at the
expense of mass market and paper formats.
0
10
20
30
40
50
60
70
80
90
100
2015 2016 2017 2018 2019 2020
Print and electronic books revenue (US$mm), 2015-2020
Print Book Revenue Electronic Book Revenue
Source: Global entertainment and media outlook 2016-2020, PwC

Market share of overall US ebook unit sales by retailer
Amazon.com
Apple Books B&N Nook
Kobo US
Google Play
Other
Source: Author Earnings

Market share of e-book unit sales in Kindle store
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Feb-14 May-14 Jul-14 Oct-14 Jan-15 May-15 Sep-15
AAP-Reported Traditionally Published Non-AAP Reported Traditionally Published
Amazon Imprint Published Indie Published
ISBN-Bearing Indie Books Non-ISBN "Shadow Industry" Indie Books
Column1
Source: Fortune Magazine

Global trends
 Digital growth has returned global consumer
books revenue to expansion beginning in 2013
 Educational publishers continue to invest heavily
in digital publishing
 China, India, markets expected to enter era of
fast, expansive growth in next five years with
global impact
 Consumer, Professional and Education market
continues to be significantly concentrated and
siloed

Key segment business drivers
Consumer
 Author block
busters
 Technology –
Products
 Technology –
Distribution
 Retail stability
 Battle for
‘attention’
Professional
 Open access
 Library budgets
 Government
investment
 Workflow
applications
 Technology
innovation
 Globalization of
research
Education
 Open content models
 Government policy
 Local & state policy
 For profit schools
 Enrollments
 Economy
 Technology
 Learning Analytics
 Competency Based
Education
 Learning Management
 Next Generation Learning
Materials

Snapshot of US education market
Source: University Business

Educational publishing by format
72
61
48
37
33
13
19
24
29
29
15
20
28
34
38
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2010 2011 2012 2013 2014
Traditional Print Custom Textbooks E-Books
Source: McGraw Hill Education

Snapshot of professional market:
Source: Taylor & Francis Investor Presentation

The big four journal publishers
0
500
1000
1500
2000
2500
3000
3500
Elsevier Springer Wiley Taylor & Francis Macmillan
In merging with Springer, Macmillan joins forces with one of
the world’s largest scholarly publishers.
Source: Nature Publishing Group

K-12 spending shifts away from textbooks

The importance of adoption states

English language education highly concentrated

Market share of higher education publishers
34% 33% 34%
21% 21% 21%
15% 16% 15%
5% 5% 5%4% 4% 4%
0%
5%
10%
15%
20%
25%
30%
35%
40%
2011 2012 2013
Pearson Higher Education Cengage Learning McGraw-Hill, Inc.
Macmillan Publishing, Inc John Wiley & Sons
Source: Nielsen PubTrack Higher Ed

Issues in higher educational publishing
 Student
 Access anywhere, anytime, any device
 Print & digital models
 Flexible purchase models
 New ‘student’ markets
 Institutions
 Demand driven purchasing
 Usage based pricing
 Integrations with existing platforms - Blackboard
 Publishers
 Risk of open access content
 Resistance of faculty to change methods & behavior

Demand increases for online learning

Higher education market is under threat

Percentage split of textbook sales revenue
Manufacturing Cost
28%
Marketing Cost
14%
Royalty
11%
College Store
Personnel
20%
Publisher Overhead
9%
College Store Overhead
7%
Publisher Profit
6%
College Store Profit
4%
Freight
1%
Source: National Association of College Stores

 1980s:
 corporatization of
campus bookstores
 Increased
sophistication of
second hand market
 2000s
 Internet market
expansion
 Content availability
 Rental market
Textbook prices have risen faster than CPI
 Results: shorter review cycles, higher prices, lower volume

Trends in education - Students
 “just in time” course materials, credentialing,
skills development for business/career
development
 Driving non-traditional delivery methods
 Open source content is becoming mainstream –
distinct threat to incumbent publishers.

Trends in education - Institutions
 Expansion of ‘for profit’ schools
 Vast investment funds outside traditional education
marketplace
 Institutional online strategy
 Adaptive learning, assessment, intervention driving
‘outcomes’
 Institutions providing services – alumni, jobseekers
 Online courses becoming core delivery method on
and off campus
 Publishing programs: open educational materials

Trends in education - Publishers
 Pressure to provide digital products:
 textbooks, enhanced textbooks, tools, platform,
integration(s), etc.
 Publishers providing services to institutions
 Staff recruitment, training, operations support,
 Changing staffing composition within publishing
companies
 Content development ‘off-shoring’
 Distribution landscape more complicated: Learning
management systems, eContent distribution, etc.
 “EdTech” marketplace

A bewildering expanse of EDTech players
Note: Above includes all education segments

Education “publishing” is expanding
Source: Elm City Consulting (Pat Sabosik)

Threat of open education resources (OER)
 Institutions actively supporting
 OpenStax
 OER commons
 Textbook pricing viewed as exploitive
 Publishers reluctant to publish in OER
categories
 OER content growing in reputation
 State/local government legislation combating
high textbook pricing
 California digital open source library

Faculty perceptions of open education resources
0
10
20
30
40
50
60
70
80
Using OER Consider Viable
alternative
No experience with
OER
Expect to use by 2020 OER never primary
text
Source: Open Resource Content

Taylor and Francis product development strategy
Source: Taylor & Francis

Taylor & Francis digital transformation
Source: Taylor & Francis

Wiley’s approach to the education value chain
Source: Wiley investor conference

Channel players
Publishers Wholesale Retailers Platforms
• Pearson
• Wiley
• McGraw Hill
• Cengage
• Houghton
• University
Presses
• 100s Others
• Ingram
• Baker & Taylor
• MBS Direct
• Nebraska
• NACSCorp
(3,400
members)
• Overdrive
• Blackboard
• Vitalsource
• Unizin (OER)
• Canvas
• Brightspace
• Google College
• Amazon.com
• Follett (940 stores)
• B&N College
• Collegiate Retail
Alliance
• Nebraska Book
• Chegg
• Rafter (OOB)
• MBS Textbook
Exchange
• Redshelf
• Sidewalk
• Walmart
Technology Solutions
• Ratex
• Verba Software
• Pubnet
• Sequioa
• Nielsen
• indiCo

Barnes & Noble profile
Source: Barnes & Noble

Follett profile
$3.6B
Annual
revenues
1,200
Campus
Stores
1,600
Virtual
Stores
80,000
Business
customers
Baker &
Taylor
Largest source
of books,
multimedia for
schools,
college, library
Source: Follett Corporation

College retail market segmentation (est).
Amazon
35%
B&N/Follett
34%
Independents
31%
Source: Research

Nielsen Book Pubtrack sales analysis tools
 Only consolidated source for data about U.S.
College Course material “sell through” and
“adoption”.
• Used by nearly 100 clients
• Contractual arrangements with primary retailers
excluding Amazon
Source: Nielsen PubTrack

Pubtrack overview
 Nationally representative sample of trends
through campus bookstores
 Primarily supplied by college bookstores (in-
store + online)
 Tied to a school (via Carnegie
Classifications/FICE codes)
 Online retailers not included (can’t be tied to
schools)
 Data on other alternate sources (e.g., student
swaps, etc) not included

Pubtrack data sources
 Course material POS (check out) raw data
 Tracks new & used POS data
 4 and 2 year colleges, select for-profit institutions
 Over 3,600 bookstores & online retailers tied to 2,500
schools
 Course adoption (enrollment) & course details
 Course book in use and instructor data from registrars
 Sample represents 65% (FTE) of higher ed. market
 Pre-order and wholesale data from 4,200 outlets
 Data normalizing
 Sophisticated modelling to accommodate missing
channel volume

Data sources:
 Retailers:
 Follett, Barnes & Noble, Nebraska, 1,500
independents
 B&N college, MBS Direct, eCampus.com
 For profit schools
 Apollo group, Laureat, Corinthian, + others
 College information
 Course codes
 Carnegie codes
 Bibliographic data
 Publisher metadata files, ONIX

Publisher dependence
 Editorial/Product development
 Revision cycles, product gaps, author candidates,
reviewer candidates, sales trends, attrition strategy
 Sales
 Books in use data, market intelligence, terrotoru
management, account priorities, adoption tracking,
forecasting, pricing strategy
 Marketing
 Market share, reviewer/focus group candidates,
market research
 Messaging & communications

The top disciplines stay constant too
12% 12%
13%
9%
9% 9%
7% 7% 7%
6% 6% 6%
4% 4% 4%
0%
2%
4%
6%
8%
10%
12%
14%
2011 2012 2013
Market Share of Top HE Disciplines (Est. Value)
Mathematics English Biological Sciences Psychology Computers & Information Systems

How students purchase textbooks
0%
10%
20%
30%
40%
50%
60%
2010 2011 2012 2013
In Store Purchase Online Device Other

Top selling course materials
Discipline: Course USD (mil)
Psychology: Introductory
$285,043
Foreign Languages and Literature: Spanish: Language:
Elementary $234,377
Biological Sciences: Anatomy and Physiology: Introductory: Two
Term $208,648
Computers & Information Systems: Applications: Office Suites
$196,961
Chemistry: Introductory: General: General
$174,726
Mathematics: Software
$161,238
Biological Sciences: Introductory: Non-Majors
$159,473
English: Composition: Introductory: Rhetoric
$151,556
English: Composition: Introductory: Handbooks: Complete
$141,958
Interdisciplinary Studies: Orientation to College
$132,086

New text price increasing the gap above used price
$64.31
$69.95
$73.85
$77.25
$82.17
$85.73
$50.74
$56.98 $58.89 $60.47 $60.69
$62.94
$-
$10.00
$20.00
$30.00
$40.00
$50.00
$60.00
$70.00
$80.00
$90.00
$100.00
AY 08 AY 09 AY 10 AY 11 AY 12 AY 13
avg new price
avg used price

Significant shift towards custom textbooks
13% 17% 18% 23%
12%
19% 13%
20%
67%
58%
61%
50%
7% 5% 7% 5%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2012 Units 2012 $ 2013 Units 2013 $
Custom Digital Package/Bundle Print Supplements

Adoption report for targeted sales activities

Using PubTrack demand reports
 Sales:
 Confirm Promised Adoptions
 Check for open adoptions
 Track future sales at school level
 Production
 Anticipate Reprint Needs
 Help Manage Stock Levels
 Marketing/Editorial
 Anticipate Future Growth Areas
 Easily track term by term sales levels
 Spot ‘missing’ sales
 Determine optimal revision cycles

Demand: Future adoptions

School adoption report

The bulk of this material was created as
part of an ‘envisioning’ session with a
client to foster a further discussion about
business strategy.
Michael Cairns
Managing Partner
Michael.Cairns@InfoMediaPartners.com
908 938 4889
LinkedIn Twitter Blog Flickr InstaGram
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High Level Overview of the Publishing Industry 2017

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