Reader's Digest Association, Inc.

, The
SWOT Analysis

SWOT ANALYSIS

Readers Digest Association publishes one of the world's best-selling general interest magazines,
Reader's Digest. The company also uses its consumer database to market books, special-interest
magazines, music, videos, and financial and health products. The market-leading position of the
Reader's Digest magazine, combined with the company's diverse business portfolio, has given the
company a strong position in the global publishing industry. However, increase compliance to
regulation would increase their operating costs thereby bringing the company's profitability under
pressure.

Strengths Weaknesses

Strong market presence Lack of capital market funding

Broad product portfolio

Opportunities Threats

Acquisition by Ripplewood Changes in the privacy law

Partnership Competition
Growth in US advertising Rising paper and newsprint costs

Strengths

Strong market presence

Readers Digest Association (RDA) is a global publishing and direct marketing company having its
presence in more than 70 countries around the world. The company is known for its general interest
magazine, Readers digest which is the world’s largest selling monthly magazine. Reader digest has
a strong brand equity in seven Asian markets across 43 product categories. Every month 23 million
copies are sold reaching 95 million readers. The magazine is published in 50 editions and 21
languages. The company publish 77 magazines worldwide including 50 distinct local editions of
Reader's Digest and 27 other magazines on food, gardening, home improvement, country living and
other topics. The company sells 50 million books a year. A strong market position in publishing
enables the company to charge a premium to advertisers thereby enhancing its brand image.

Broad product portfolio

The company offers a broad product portfolio including magazines, books, recorded music collections
and home videos, financial products, health products and online marketing. The company reaches
millions of consumers through more than 25 other magazines, including Every Day with Rachael
Ray and America's best-selling food and cooking magazine, Taste of Home. Each year, the company

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SWOT Analysis

publishes about 50 million books including the Select Editions series and offerings in the cooking,
do-it-yourself, health, gardening and children's titles. It markets collections of music, from Beethoven
to Ella Fitzgerald to pop divas, and videos and audio books. These products are marketed through
a wide range of channels including direct mail, display marketing, direct response television, catalogs,
retail and the Internet.

Weaknesses

Lack of capital market funding

The company lacks the ability to raise capital market funding being a privately held company as
compared to its publicly-held competitors such as Time Warner, Washington Post and Hearst
Corporation. The company does not publish consolidated balance sheets and is under no obligation
to comment on its financial state. These aspects of company's operations restrict the company's
ability to receive funds for its capital budgeting plans. Also, the company does not have any access
to capital market funding such as public debt or equity markets. The company has to depend on
cash generated through its operations to fund expansion and growth opportunities. The company’s
lack of transparency would adversely affect its brand image.

Opportunities

Acquisition by Ripplewood

Ripplewood Holdings acquired Reader's Digest Association in March 2007. Ripplewood Holdings
has considerable investment expertise in the publishing and direct marketing industries. Its portfolio
of investments includes Direct Holdings Worldwide, a leading global direct marketer of entertainment
products under the Time Life brand, and WRC Media, a leading publisher of supplementary
educational materials for the school, library, and home markets. Together with its portfolio companies,
Direct Holdings and WRC Media, Reader's Digest would be benefited from a diversified, multi-channel
publishing platform. Acquisition by Ripplewood would strengthen the brand and business of the
company.

Partnership

Global Corporate Information Solutions entered into a multi-year exclusive partnership with The
Reader's Digest Association (RDA) in October 2007. The partnership would enable Global Corporate
Information Solutions to deliver outsourced print procurement and marketing solutions to RDA's
operations in 19 countries across the US and Canada, Europe, Middle East, Asia Pacific and Latin
America. In creating the Print Utility, Global Corporate Information Solutions will assume the
promotional printing operations of RDA's direct-mail business, providing RDA with increased leverage
and purchasing power. The Print Utility program is expected to both help RDA improve its business
processes worldwide as well as reduce its costs. Partnership with Global Corporate Information

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SWOT Analysis

Solutions would enable the company to reduce costs and improve its business processes worldwide
which would thereby provide a sustainable and long-term growth.

Growth in US advertising

The advertising market in the US is expected to grow through 2008. In addition, increased broadband
penetration levels are going to have a profound impact on online advertising as companies will be
able to improve the graphics of their online advertisements. The company is a leading publisher of
journals and magazines, both in print and Internet-based. Also, the company has a substantial US
presence. This should enable the company to acquire a larger part of the growing advertising market
in that country and thereby boost its revenues.

Threats

Changes in the privacy law

Reader's Digest Association collects information from their customers in the various markets in which
they operate and they utilize that information principally for marketing and promotion purposes. Their
collection, transfer and use of this information is limited by privacy and data protection laws and
regulations in those jurisdictions, including the 'National Do Not Call Registry' operated by the US
Federal Trade Commission, the US Federal CAN-SPAM Act of 2003 and the European Data
Protection Directive. Reader's Digest Association compliance with these regulations in these areas
would increase their operating costs and the same time would affect in the cross selling of various
products it offers in these markets.

Competition

Publishing is a highly competitive business. The company's magazines, books and related publishing
products and services compete with other mass media, including the Internet and other type of
leisure activities like adventure sports.The company also faces competition from other strong branded
magazines in the publishing segment market, which pose a serious threat to its market share. Its
prime competitor includes Advance Publications, Axel Springer, Bertelsmann, Hearst Corporation,
Meredith Corporation, Rodale, Time Warner and Washington Post Company.The companies compete
for attracting readers and advertisers for their revenues. Intense competition might eat away the
company's market shares and could reduce its profitability.

Rising paper and newsprint costs

The price of newsprint has historically been volatile. Consolidation in the North American newsprint
industry has reduced the number of suppliers. This has led to paper mill closures and conversions
to other grades of paper, which, in turn, have decreased overall newsprint capacity, resulting in price
increases and the likelihood of more price increases in the future. Magazine publishers are already
facing rising costs in technology postage, and paper prices. Paper comprises some 15%-20% of

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publishers' costs. Furthermore structural changes, including mergers and a growing role for aggressive
private equity, are expected to drive prices up in 2008 by 20% to 25%. The weakness of the American
dollar is increasingly restricting publishers' overseas options. Increased rates of its key raw materials
can increase the cost base of the company.

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