Digital reading… and Microsoft?

Digital book… and Microsoft

1. State of Art Music & Video 2. Digital readings market 3. How to become next leader4. Recommandations

Except that… digital experience is

First, a « revolution » for cutomer

1. You can bring with you all music / videos you own2. Buy music / video you want when you want

3. Pay only what you really want

Same as physical experience (but don’t say it!)

Music market in 2009

Video market in 2009

Not consistent trends• In the US: 10% decrease. Digital copies only 1,1% growth (43 % total) • In Europe: -4% total. Digital copies + 29,7 % (13% total). • 13 countries are growing their markets. Digital copies compensate physical copies market.

17B$ business (-7% VS 2008). Despite strong decrease in past years, digital copies are slowly replacing physical copies. From 0$ in 2003 to 4,3B$ in 2009 (25% total sales), 9% growth.

Digital marketFrom 2004-2009, + 940% VS -30% traditionnal industry. More than 400 music plateforms on Internet with 11M titles.

Innovative entertainment industry• New business models (Media, VOD, Online Video…). Free & paid content.• Differentiation via technologies (HD, 3D…) to limit digital business• Price war!

Strong decrease in last years, & digital copies is replacing physical copies.

Overall decrease but strong digital growth• Approx 90B$ among 5 categories • Box office is going up and forecast are good. • Retail is decreasing strongly from 40B$ to 34B$ within 7 years (-15%!)• Rental after going up is now decreasing, suffering from VOD / online video as well• VOD and Online video are getting momentum (from 1 to 11 B$ in 6 years!)

Itunes (23 countries) have 100M members and more than 10B downloads. Wall Mart, Best Buy, Amazon are here too.

Learnings from digital Music & Video business

• Innovative business models• New leaders• New chain value

Forget Video & Music markets business rules

• Only way to postpone full Digital era (3D, HD…)

• And the best way to boost it (Optical network, infrastructure, devices…)

Technology is pro & cons

digital

4 years to get 15% marketshare

US and Europe are the key markets

Digital Market Chain Value

ContentDevice

Software

Device Software

To be the next digital reading leader, (re) build the digital value chain.

But does it worth it?

Content

Books Comics Press

# slates

Opportunity in 2014

CA (trend)Digital %

Tablets will cannibalize netbooks, outselling netbooks starting in 2012. In 2015, 23% of all PCs sold to consumers in the US will be tablets. Approx 100 millions

a year. Slate IB/ebooks IB approx 300M users. (IDC 2010)

Leader Revenue Opportunity in 2014 with 30% market share

60B$

9B$

3B$

1B$

30B$

15B$

8,5B$/ year

Digital Readings = Next digital entertainment eldorado?

Digital Readings = digital Music / Video?

Would readers love to: 1. Bring with them all books/ press they own? 2. Buy books/press you want when you want? 3. Pay only what you really want?

…YES

Are you sure?

• Cultural– Old story (6th century)– Smell & touch fetichism– Pillar of education

• The content is the container • The Music, The Movie but

Readings

Yes we are!

• Education will help digital reading adoption• Fetichism will shift from « smell & touch » to

« design »• Tech will break chains

of books container• Innovative way to sell &

buy books

Mitigate

Remove

Mono usageNon portabilityGood enough hardware

Hardware Price Content priceReading = buying conceptBooks = competitor / Retailers= competitors

Reinforce

Create

Hardware capacity (storage, battery…) E-Books platform as dev platformreadings Diversity (from comics to press)Partnerships Press & Hardware

Books experience (« killer books »)Dev Tools to help publisher to create new books experienceNew business model with Ads Cloud Books

What we’ve learn from the market

Blue Ocean

Where we should go? Price

Experience

Hardware

500$150$ 150$<X<400$

Reading Reading + Video + Web New Reading + Video + Web

1 to 2 3 to 5 100+Business Models

Hardware Content License + Ads + Content

Our Assets

8.6 Million Professional Developers

DEVELOPERS

600K Partners

PARTNERS

1.1 BillionPC Users

Worldwide

CUSTOMERS

60%+ of PC are running Silverlight

PLATEFORM

What about the device? DeviceDefine technical requirements and work with OEM

Cloud by designRely on Azure, Build store, Sync experience

Microsoft digital reader

What about the business? Content PlatformSynergies with Zune to get content

ContentBuild partnerships with Press groups AND retailers

Ads businessInclude Bing, AdCenter asap

Microsoft digital experience

Key question: revenue sharing (OEM, Content, Dev, Microsoft, Retailer)

APPENDIX

The top book retailers in the United States1. Barnes and Noble2. Borders3. Books-A-Million4. Wal-Mart5. Costco6. B. Dalton7. Waldenbooks8. Amazon.com9. Books and Co.10. Bookland