Codex-Group © 2014 Proprietary and Confidential 1

Peter Hildick-SmithCodex-Group LLC16 W. 16th St.NY, NY 10011212-255-0405hildick-smith@codexgroup.net

Digital Book WorldJanuary 14, 2014

The Author BrandOpportunity

Codex-Group © 2014 Proprietary and Confidential 22

Three Pillars of Initial New Book Sales

Availability

Conversion

Discovery + Conversion + Availability = New Book Sales

Discovery

BuyerTarget

Do I Knowthe Book Exists?

Is the Book Idea Interesting

Enough to Buy?

Is the Book Available to Buy Whenever,

However I Want It?

1

2

3

Codex-Group © 2014 Proprietary and Confidential 33

Three Pillars of Initial New Book Sales

Availability

Conversion

Book Conversion Driven Most by Author “Brand” and Book Topic/Message.

Discovery

ReaderTarget

Is the Book Idea Interesting

Enough to Buy?

2

Author “Brand”Topic/Message

Codex-Group © 2014 Proprietary and Confidential 4

“Brand Author” Defined

A “Brand Author” = 500,000 Fans or More.

500,000 Fans

1% of Frequent Book Buyers50,000,000Adult Frequent

Book Buyers

Codex-Group © 2014 Proprietary and Confidential 5

Why Author Brands

Matter

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Brand Author Bestseller Placement – 1/19/2014

Brand

Brand

Brand

Brand

Brand

Brand

Brand

Brand

Brand

Brand

Brand

Brand

Brand

Bestseller List Dominated by “Brand” Authors.

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13%

24%

29%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

All Books Bought Last

PersonalRecommendations

Book Topic/Message

Favorite Author/Series

New Book Purchase Decision Factor Share: Last Book Bought – 11/2013

Most Influential Purchase Decision Factor: Last Book Bought

When browsing for new books, which of the following factors influenced your decision most when choosing [your last book bought]? (pick one)

“Favorite Author or Series” Single Biggest Book Purchase Decision Factor.

BookBought Last

Codex-Group © 2014 Proprietary and Confidential 8

11%

19%

43%

14%

18%

32%

15%

32%

17%

14%

35%

8%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Genre Fiction Literary Fiction Narrative Nonfiction Utility Nonfiction

Recommend

Topic/Message

Favorite Author/Series

New Book Purchase Decision Factor Share: Last Book Bought – 11/2013

Most Influential Purchase Decision Factor: Last Book Bought

When browsing for new books, which of the following factors influenced your decision most when choosing [your last book bought]? (pick one)

“Favorite Author or Series” Dominant Factor in Fiction, Major Potential Force in Narrative Nonfiction.

GenreFiction Literary

FictionNarrative

Nonfiction UtilityNonfiction

Codex-Group © 2014 Proprietary and Confidential 99

20%

62%

25%

53%

33%

42%

43%

31%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Genre Fiction Literary Fiction Narrative Nonfiction Utility Nonfiction

“Brand” Authors Most Purchased in Fiction – Unknowns Often Avoided.

Book Buyer’s Author Opinion BEFORE Discovery – 11/2013BEFORE you first discovered [the book you bought last] -- what was your overall opinion of its author or series?

Very Good/Favorite Author

Not Familiar Author

Author Rating BEFORE Book Discovery

GenreFiction Literary

FictionNarrative

NonfictionUtility

Nonfiction

Codex-Group © 2014 Proprietary and Confidential 10

3%

45%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Not Familiar Author Favorite Author

Author Equity Brand Impact on Book Sales – Purchase Propensity – Fiction

Author Brand Equity is Book Sales Multiplier!

15X

Not FamiliarWith Author

Author“Fan”

Codex-Group © 2014 Proprietary and Confidential 11

449

228,116

0

50,000

100,000

150,000

200,000

250,000

Robert Galbraith JK Rowling

Author Equity Brand Impact on Book Sales – Initial 8 Week Print Unit Sales

Author Brand Equity is Book Sales Multiplier!

500X

April 302013

July 142013

Codex-Group © 2014 Proprietary and Confidential 12

33%

54% 55%58%

73%

82%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Undisputed Truth A Wanted Man Simple Dreams Storyteller Dust Sycamore Row

Fan Contribution to Total Book Demand

Author Fan Sales Contribution: % Book Purchase Demand From Author Fans

Fan Contribution: Major Authors Depend on Fans for 50-80% of Sales.

CelebrityBiography

Y

Codex-Group © 2014 Proprietary and Confidential 13

Retail Price Expectation: Impact of Author Brand Strength – 6/2013

$18.36

$14.49

$19.84

$5.63

$7.49

$9.36

$5.00

$7.00

$9.00

$11.00

$13.00

$15.00

$17.00

$19.00

$21.00

Not Familiar with Author Name Very Good One of My Favorites

Hardcover: ThrillereBook: Thriller

Book Buyers Expect to Pay Significant Premium for Their Brand Authors.

How much do you normally expect to pay for a new or recently released book by (the author of the book you bought last) -- in each of the following formats?BEFORE you first discovered [the book you bought last] -- what was your overall opinion of that author?

Hardcover

eBook

+66%

+37%

Unknown Author

“Brand” Author

Thriller Authors

Codex-Group © 2014 Proprietary and Confidential 14

Author Fan Base vs. Initial 8 Week Unit Sales – Jodi Picoult

42,000

105,000

206,000

251,000

0 50000 100000 150000 200000 250000 300000 350000 400000

July 2004

April 2006

March 2008

April 2010

0.8%

5.7%

8.7%

9.4%

0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20%

July 2004

April 2006

March 2008

April 2010

The Bigger The Fan Base – The Greater The Sales Potential.

AuthorEquity

Initial 8Week Units

Codex-Group © 2014 Proprietary and Confidential 15

MakingAuthor Brands

Work

Codex-Group © 2014 Proprietary and Confidential 16

34%

53%

66%

87%

95%

95%

0% 20% 40% 60% 80% 100%

Lee Child

Jodi Picoult

PatriciaCornwell

LindaRonstadt

John Grisham

Author Y

A Famous Name Is Not Enough.

RecognizeName

Name Recognition Measurement – U.S. Past Month Book Buyers – 11/2013

CelebrityBiography

Y

Codex-Group © 2014 Proprietary and Confidential 17

7%

6%

8%

4%

21%

1%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0%

Lee Child

Jodi Picoult

PatriciaCornwell

Linda Ronstadt

John Grisham

Mike Tyson

34%

53%

66%

87%

95%

95%

0% 20% 40% 60% 80% 100%

Lee Child

Jodi Picoult

PatriciaCornwell

LindaRonstadt

John Grisham

Author Y

Author Equity is Measurable – Fan Loyalty is The Key.

% Book Buyer Fans

Author Equity Brand Measurement – U.S. Past Month Book Buyers – 11/2013

RecognizeName

Codex-Group © 2014 Proprietary and Confidential 18

Author Audience Strength

1%

21%

7%

4%

6%

0.6%

8%

0%

5%

10%

15%

20%

25%

30%

35%

0% 20% 40% 60% 80% 100%

% Familiar with Author

% R

atin

g A

utho

r as

Favo

rite

GROWTH FRANCHISE

MATURE FRANCHISEDEVELOPING

DIAMONDIN THEROUGH

Net Equity Score% of all book shoppers

rated as author fan

Jodi Picoult

Stephen King

Author Y

John Grisham

Linda RonstadtAuthor X

Lee Child

Patricia Cornwell

Invest in Author Brand Development.

Author Equity Matrix: Book Buyer Audience Strength

FanLoyalty

Platform Size

Acquire/GrowManage

Fix

Avoid

Codex-Group © 2014 Proprietary and Confidential 19

Author Fan Fulfillment: % of Author Fans Who Own/Plan to Buy Book

15% 16%21%

41%48%

50%

70%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Self-Help P Self-Help L Simple Dreams Sycamore Row The Storyteller Dust A Wanted Man

% Author Fan (VG/Fav) Fulfillment

Fan Fulfillment – Does the Book Connect with its Author’s Fans?

Over Half of Fans Want Book

Less Than Half of Fans Want Book

Average: 45%

Self-HelpP

Self-HelpL

Codex-Group © 2014 Proprietary and Confidential 20

705,000

238,000 223,00093,000

0

100000

200000

300000

400000

500000

600000

700000

Self-Help W Self-Help P - Self-Help F Self-Help L

Initial 8 Week Unit Sales*

“Brand Author” Fan Fulfillment Impact – Initial 8 Week Unit Sales

Miss Your Fans – Miss Your Sales.*Source: BookScan initial 8 week unit sales

- 467,000units

- 130,000units

Self-HelpP

Self-HelpL 16% Fan

Fulfillment

15% Fan Fulfillment

PriorSelf-Help

Title

PriorSelf-Help

Title

Codex-Group © 2014 Proprietary and Confidential 21

Author Brand Sales Impact

Multiple Author Brand Sales Growth Avenues.

Author Acquisition

Fan Fulfillment – Topic & Message

Price Premium

Category Expansion

Marketing

Greatest Impact

Moderate Impact

Relative SalesImpact

Codex-Group © 2014 Proprietary and Confidential 22

Author Brand Growth Opportunity

Codex-Group © 2014 Proprietary and Confidential 23

Author Brand Growth Opportunity

FAN LOYALTY DRIVE SALES: Primary Sales Source

SALES MULTIPLIER: #1 Conversion-to-Sales Factor

PRICE PREMIUM: Loyal Fans Value Their Authors

CONSISTENT BOOK-to-BOOK GROWTH: Fan Fulfillment

PARTNER CHALLENGE: Author, Fan, Agent, Editor, Publisher