Publishing in Education - Partnership with Microsoft

1. Publishing in Education - Partnership with Microsoft Publishers and Content Partners WW Education Microsoft Corporation

2. Market Overview

3. Content landscape: ~$500B is spent worldwide on readable content (Newspapers and Books are ~50% of spend) Public Private WW content spend* $B, CY11 Total=~$500B $160B $130B $96B $78B $44B 100% Prof Digital - $1B Trade Digital - $1B Personal + Corporate content*** Digital - $7B Professional - Print $19B 90% Trade - Print $19B Industry information $27B Higher Ed Dig - $1B 80% Higher Ed - Print $26B Cons Dig - $2B 70% Web content (Display+ Mobile advertising) 60% Web content (Display+ Mobile advertising) K12 - Print $13B Marketing information $21B Cons Dig - $3B 50% Print $153B Consumer - Print $70B 40% 30% Consumer - Print $66B 20% Financial information $30B 10% 0% Newspaper Books Magazines Business information Internet advertising *Includes direct spending (e.g. subscriptions, purchase costs, etc…) and ad spending ** Does not include $300B in internet access fees or $36B in search advertising *** Size of shape does not imply a dollar or usage value Note: professional book publishing includes books for scientific, technical, legal, medical, and financial services industries --------Source: PWC 2011 Note: digital v. print split not available

4. Tablets/eReaders expected to see major growth through CY15 (48%/39%% CAGR); however, eReaders only expected to ship ~44M units in CY15 eReader/Tablet shipments are currently small compared to most other Office end-points … … however, baseline forecasts estimate that eReader/Tablet shipments will be 10% of WW device shipments by 2015 Office end-point universe WW device shipments (CY10) Office end-point universe WW device shipments (CY15), C10-C15 CAGR Smart- phones (304M) Smart- phones (1,033M, 28%) Office 2010, O365 Office 2013, O365 eReader (12M) PCs (347M) PCs (535M, 9%) eReader (44M, 39%) Tablets (18M) Connected TVs (~79M) Tablets (138M, 48%) Connected/Smart TVs (376M/54%, 110M/NA) Microsoft Confidential Source: IDC, In-Stat July 2011

5. Overview of publishing process Example applications InDesign Distribution services, Adobe Content Server Reader Kindle direct publishing tools Kindle bookstore/ Whispernet Kindle HW/App iWork iTunes/iTunesU/iBooks/iPad iAuthor/iBooks /iTunes/iTunesU iPad PubIT B&N.com Nook Google Docs Google Books Google Reader Windows 8 Device Office Azure Word press, Blogging sites StumbleUpon, Flipboard Microsoft Confidential

6. Education market opportunity Going digital Increasingly, education markets are going digital. International market opportunities growing fast. Services in demand for content localization, content management infrastructure optimization, systems and solutions integration. Content providers are building distribution partnerships on WW scales to meet demands. Digital Learning for 1.5 Billion Students 1Billion/500 Million New Users by 2015 Growth of Low Cost Devices in Education Student Choice & Voice Growing Publishers Influencing Technology Decisions Evolution of School IT Platform Microsoft Confidential

7. Windows 8 Microsoft Confidential

8. Windows reimagined A new Metro style UI where touch is a first-class citizen along with full mouse-and-keyboard support Designed from the chipset up for multiple form-factors– tablets, laptops, desktops & all-in-ones The Windows Store on every device with a full commerce platform and flexibility New development models built on WinRT, including native support for HTML/CSS/JS, C#/XAML, C++/DirectX Microsoft Confidential

9. WINDOWS 8 DEMO Microsoft Confidential

10. Windows on ARM • Windows on ARM (WOA) is a new member of the Windows family that builds on the foundation of Windows • Metro style apps will run on both WOA and Windows 8 on x86/64 • WOA includes desktop versions of the new Microsoft Word, Excel, PowerPoint, and OneNote • WOA supports the Windows desktop experience including File Explorer, IE 10 for the desktop, and most other intrinsic Windows desktop features, but not the installation of 3rd-party desktop apps or plug-ins • With WOA we anticipate integrated, end-to-end products—hardware, firmware and WOA software, all built from the ground up Microsoft Confidential

11. Single largest potential market for your apps/titles 500M 247M 234M 152M 112M 40M 30M 13M iPad Windows Android phones Android tablets iPhone Android iOS Mac Microsoft Confidential As of December 2011 11

12. IDC Windows forecast based on historical trends IDC Forecast All-up Windows Annual Sales Volume Worldwide (based on historical trends) – Consumer/Enterprise (millions) Source: IDC Worldwide Windows Client Operating Environment 2011–2015 Forecast

13. Why Build a Metro Style App? Microsoft Confidential

14. Why build a Metro style app? Content before chrome– Your app shines and immerses users in your experience Live tiles engage usersand draw them back into your immersive experience Search Search surfaces your app and content when it is most appropriate across the whole system Share connects the content of your app to other apps, contacts and social networks, drawing in more users Share Microsoft Confidential

15. Why build a Metro style game? Content before chrome lets your game shine and immerses users in your experience Live tiles engage usersand draw them back into your immersive experience Devices Devices Windows 8 supports a wide range of input devices, sensors, and form factors Share connects the content of your app to other apps, contacts and social networks, drawing in more users Share Share Microsoft Confidential

16. Why build a Metro style media experience? Content before chrome lets your content shine and immerses users in your experience Snap view lets users consume and interact with content and any other app at the same time Live tiles engage usersand draw them back into your immersive experience Contracts engage users, and connect your content to other apps and play-to devices Search Share Devices Microsoft Confidential

17. Kno – 150,000 eTextbook Titles Demo/Video

18. The Windows Store Unprecedented Reach Optimized for Discoverability Transparent Approval Process Flexible Business Models Maximizing Developer Revenue Microsoft Confidential

19. The Windows Store Paid downloads, trials, and in-app purchases. You keep 70% of the first $25k, 80% of the rest Use your own commerce engine and keep 100% or use the Windows Store’s full commerce platform Advertisewith Microsoft Advertising or your preferred ad vendor. Use app or web advertising networks Robust analytics for free, including demographics, reviews, referrals, and usage & performance statistics Microsoft Confidential

20. Scale via OEM partnerships • OEMs can preinstall up to 24 Metro style apps • OEM preinstalls are listed on the Start screen in an OEM group • The preinstalls contain both wide and square tiles and can vary based on geography and market • Increase the discoverability of your app • Most effective for apps that have broad appeal and that monetizewithin the app (e.g., “freemium”, in-app purchases, services) • OEMs can also feature apps and offer exclusives in the Windows Store Microsoft Confidential

22. www.chrisjordan.com

23. HTML 5 & Digital Content Transformation “Books” of the future will… The future…or the end of the beginning From FLAT to SMART Be predictive Integrate challenges, assessments, rewards into context Be dynamic…mixed media filled…branching paths Include multiple viewpoints…author, community, etc. Be readable on any device Understand your reading history…what books you’ve read before Understand your learning history…grades, subjects, emphasis

24. Helliwood in Germany – Imagine a new solution for young learners Video

25. Internet Explorer 10 Microsoft Confidential

26. Internet Explorer reimagined Your website shines. Controls appear only when you need them, leaving your site front-and-center Standards-based markup runs perfectly in a modern, plug-in free, hardware-accelerated browser Integrate with Windows 8 with high-resolution favicons for pinning and touch-optimized design Seamlessly connect your website and app experiences through deep-linking and single sign-on Microsoft Confidential

27. The path to Windows 8 GA Quality driven milestone based development Consistent with Windows 7 release cycle Windows launches “Every 2 to 3 years” ConsumerPreview Release to Manufacturing DeveloperPreview General Availability • September, 2011 • Windows 8 announced at //build • Windows 8 SDK available for download • February, 2012 • Windows 8 Consumer Preview available for download • Preview Store available (apps by invitation only) August 1, 2012 October 26, 2012 Microsoft Confidential

28. Building great Metro style apps Partner Commitment: Development & design resource to build an app Submit app to Store Ongoing maintenance and enhancements Microsoft Will Provide: Documentation Technical Assistance Idea Books Design Support Microsoft Confidential

29. Teaching and eLearning for Education Develop eLearning materials Simple ways to manage more eLearning resources Smart assessment tools

30. Teaching and eLearning Our Products Server Cloud Cloud Desktop Create individual Web portals where students and teachers can access the apps, class lists, timetables, and resources they need. A consistently great user experience across all devices, plus tools for blogging, making movies, retouching photos etc. Windows 8 Learning Suite Email, calendaring, resource scheduling, contact management, voicemail and unified communications. Software for developing captivating multimedia presentations, podcasts, videos or interactive online courses plus the ability to carry on working using Office Web Apps, even if they don’t have the software on their PC. Unified communications including presence, instant messaging, voice, audio and video conferencing. Enables you to attach additional monitors and keyboards to a single computer to provide each student with their own computer desktop. Free Microsoft tools for subjects from maths, to music, design and science.

31. Innovative teaching employability doing more with less urgency to drive change personalisation digital content revolution 6 key education trends the perfect storm

32. Thank you Microsoft Confidential

33. Appendix Microsoft Confidential

34. Winning with Online Learning Content Creation Content Distribution Services Consumption Scores Editorial Systems Desktops/TVs Azure Publisher Marketplace Avatar Notebooks/Netbooks eReader Enabling consumption, collaboration and management Content storage & Enterprise Marketplace Tablets/Slates Distance & collaborative learning Content storage, control, versioning App storage & Consumer scale Assemble content as interactive experience streams Smartphones ePortfolio and Student records Content discovery that is personalized for learner, educator, and institution ePub and DRM . Points, achievements, Avatar Superstars Motion based UI Content construction Achievements Ubiquitous access anywhere, any platform, any device Engaged Collaborative and dynamic work/study environment Pervasive HTML Personalized & Integrated Suggest content based on ePortfolio and other context Open and Secure SHAPE THE FUTUREReach the Next Billion PC Users EduVault

35. Sub-segment overview: K12 textbooks Average US student spends ~5 hours a day in class, and ~3 hours a day on Homework/research K-12 spend expected to see modest growth (2% p.a.) over next 5 years Growth projected to be consistent across GEOs, average growth projected for N. America CY05-CY10 CAGR CY11-CY15 CAGR CY11-CY15 CAGR US student time spent on edu activity* Hours/day, CY05-CY10 WW K12 textbook revenue Sales ($B), CY11-CY15e WW K12 textbook revenue Sales ($B), CY11-CY15e $14B $14B $15B $15B 4.7 2% 0% 2% 4.5 79% 3% Digital Digital 1% 0% 2% 2% 2% 2% Total/ citizen .44 .41 Competitive assessment Overview and trends • ~17% of US population enrolled in K-12 education • Lack of budget in many US districts, technology is generally own budget line item, and falls outside of salaries and capital equipment • Some schools utilize technology levies to raise extra money • Most schools do not have IT support needed for digital deployment • Hardware currently evolving faster than ideal depreciation cycle (4-5 years) • Obama admin has called for convergence to digital books within 5 years • FCC has published a transition outline (estimates $600 savings per student) • US market is highly concentrated, 4 US publishers (McGraw-Hill, Pearson, and Houghton Mifflin Harcourt, Scholastic) have 90% of market) • 6 largest states have enough buying power to get books tailored to their curriculums from publishers • Surrounding states choose which states to follow • Outside of US, a number of countries administer K-12 at national level (e.g. Singapore, S. Korea) • S. Korea working with Samsung nationwide digital conversion • Additional opportunities globally for supplementary education spend (e.g. China) • No real front-runner in terms of digital K-12 marketplaces as almost all purchasing is done by school districts • Target of Apple’s current iBooks Author launch • Will rely on existing presence in Education channel • Some educations site doing well offering eLearning applications (e.g. IXL) Microsoft Confidential *Note: data does not differentiate between K-12 and higher-ed Source: PWC, 2010 US census, 2010 BLS time use study, http://www.theverge.com/2012/2/3/2767593/obama-administration-digital-textbooks-5-years

36. Sub-segment overview: higher education textbooks Average US student spends ~5 hours a day in class, and ~3 hours a day on Homework/research N. America and EMEA projected to drive 3% global growth in higher ed textbook sales Digital higher ed. textbooks expected to 35% growth p.a. to grow to 12% of total sales by 2015 CY05-CY10 CAGR WW higher education textbook revenue Sales ($B), CY11-CY15e CY11-CY15 CAGR US student time spent on edu activity * Hours/day, CY05-CY10 WW higher education textbook revenue Sales ($B), CY11-CY15e CY11-CY15 CAGR 3% $27B $30B $27B $30B 4.7 0% 3% 4.5 4% Digital 35% Digital 2% 0% 3% 1% 2% 3% Total/ citizen .44 .41 Competitive assessment Overview and trends • ~7% of US population enrolled in college or grad school • Enhanced tools will enable professors and schools to self publish materials and reduce need for publisher supplied printed materials • Majority of digital education content is currently PDF based • Book availability is much lower than in consumer space; Internal estimates are that between Amazon and B+N only half of books are digitized • Pricing has stayed high (digital books on Amazon are often more expensive than used books) • Largest selection currently offered by Coursesmart • venture owned by 8 large publishers • Vitalsource owned by Ingram has large share in certain narrow higher ed segments (e.g. dentistry) • Chegg is a newcomer that started by renting scanned copies of actual books but is quickly moving into eBook sales and is investing in a cross platform HTML5 reader • Kno developed a cross platform reader, file format put overlays over PDFs to enhance content, add quizzes over pictures, etc… • B&N Study client, big advantage is that the user can have multiple books open, can copy and paste into word document, and track references back to document • Mac/windows only • iTunes U – 5 years worth of videos (some/mostly – check) avail for free to pull into curated materials *Note: data does not differentiate between K-12 and higher-ed Source: PWC, 2010 US census, 2010 BLS time use study Microsoft Confidential