For most people, the days of shopping at a record store or making calls over a landline are long gone.
5 Industries on Life Support
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If you read the print edition of a newspaper, still make calls over a landline or plan to rent a tuxedo for an upcoming wedding, you are doing what many of your friends and neighbors gave up long ago.
Analysts at IBISWorld, a market research firm, recently compiled a list of 10 industries that may be on the "verge of extinction in the United States." Within its database of close to 700 industries, about 200 are in decline, with the ones selected having seen large and steady drops in revenue and number of establishments. From the beginning of 2011 to the end of 2016, these industries are likely to deteriorate further.
"People might think that we are coming out of recession and these industries have hit bottom, so therefore everyone should be going up," IBISWorld Senior Analyst Toon van Beeck says. "But that is definitely not the case. A lot of these revenues peaked in about 2000 and since then they have declined year over year."
He explains that while economic cycles, the ups and downs of bull and bear markets, often swing every eight to 10 years, "industry life cycles can be three to 50 years where they go from maturity into decline." The industries singled out by the firm "are really at the end of their decline phase or they are in rapid decline."
Most of the industries share common reasons for their bleak prospects, including damage from advances in technology, industry stagnation and external competition, he says.
Because labor costs and regulations are high domestically, many manufacturers send their production to foreign countries. Downward price pressure from domestic wholesalers, retailers and consumers forces U.S. producers to cut costs to offer a competitive price. Many firms that cannot outsource have a difficult time competing.
Advances in technology are another drag on companies whose failures drag down their industry. The rapid pace of technological developments may create industries and business opportunities. But traditional companies not forward-thinking or nimble enough to adapt will court failure.
Adding to the vicious circle, struggling companies are often forced to cut prices and reduce production costs. Doing so hammers away at budgets for R&D, as well as capital and technology investments. The resulting stagnation drags down these businesses, and their overall industry, even more.
Wired Telecommunication Carriers
In singling out wired telecommunication carriers as among the 10 barely breathing industries, IBISWorld points that revenues have dropped nearly 55% since $341.8 billion in the year 2000. An additional decline of 37.1% is projected over the next six years.
Big players such as AT&T (NYSE: T - News) and Verizon (NYSE: VZ - News) still dominate the industry despite losing a steady stream of customers, he says, because of their prominence in the wireless space for which many former customers are jumping ship.
Record Stores
Record stores, van Beeck says, are a "sad story" hard hit by changes in how their customers now find, buy and listen to music. There may still be a strong, core following for traditional vinyl, but many shops haven't found a way to expand beyond that niche.
The industry saw revenue plummet 76.3% since 2000, to about $2 billion. IBISWorld expects the bad news to get worse as they lose nearly another 40% by 2016.
Van Beeck says record stores are a case study in not adapting nimbly enough to changing times.
Bookstores, which bear conceptual similarities to record stores, are themselves in rough shape these days -- with the once giant Borders (NYSE: BGP - News) now in bankruptcy. Their declines weren't substantial enough to make the cut of his ranking, van Beeck says. In fact, they may offer some hindsight into what record stores could have done -- creating a more customer-friendly environment with cafes and a more diverse inventory.
Photofinishing
The photofinishing industry has also lost its focus and vibrancy.
"While Eastman Kodak (NYSE: EK- News), Fuji Film and Ritz Camera were once major and prominent companies, they are just a splash of what they were in their heyday," van Beeck says.
With about $1.6 billion in revenue last year, they have faced a decline of nearly 70% during the past decade. Revenue could drop another 40% by 2016, IBISWorld estimates.
Once again, technology is the issue. Digital cameras continue to offer improving quality and falling prices. Color printing can be done at home and cheap digital storage, on hard drives and flash sticks and through online services, has reduced the need to produce a hard copy of every shot as a keepsake. Overall, the total number of prints in the United States has fallen at an annualized rate of 3.5% over the past five years, he says.
Video Postproduction
Video postproduction is another industry done in by the do-it-yourself opportunities presented by new technology. Once requiring specialized expertise, many of these tasks can be done on even an average home computer.
Companies such as Technicolor have suffered as a result. Industrywide, revenues have fallen 25% in the past decade to just north of $4 billion, with another 11% decrease predicted by 2016.
Newspapers
The Internet's role as a creator/destroyer is also behind the constant talk of the demise of newspapers. Newspaper publishing, a $41 billion industry last year, fell 36% since 2000, with a 20% decline likely by 2016.
Failing to see the writing on the wall, and how the online world would snare eyeballs and advertisers, is once again a major part of the problem these companies face. It's been years and years since the "information superhighway" was a hot concept, and yet such companies as The New York Times {NYSE: NYT - News) are just now getting serious (though not yet successful) about such concepts as "paywalls" for their content.
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