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Defining the Ten Dying IndustriesTo be chosen for IBISWorld’s list of 10 dying industries, industries needed to be in the decline phase of their life cycle. Furthermore, during the 10 years from 2000 to 2010, the industries must have experienced a sizeable contraction in revenue and the number of establishments. Finally, to be on the list of 10, they needed to forecast further deterioration for revenue growth and establishments over the five years ending in 2016. From these basic boundaries, 10 industries were standouts: manufactured home dealers; record stores; photofinishing; wired telecommunications carriers; apparel manufacturing; newspaper publishing; DVD, game and video rental; mills; and formal wear and costume rental. Apparel manufacturing includes a combination of three industries, comprising men’s and boys’ apparel manufacturing; women’s and girls’ apparel manufacturing; and costume, uniform, infant and other apparel manufacturing. Additionally, the mills sector groups together four industries: hosiery and sock mills; textile mills; apparel knitting mills; and carpet and rug mills. Damaging external competition Particularly relevant to the manufacturing sector, major competition for items produced in the United States comes from imported products, especially low-cost items. Since 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 in order to offer a competitive price. American firms that cannot send their production activities out of the country face strong competition from imports; therefore, these businesses often fail. Advancements in technology While technological developments make life easier and more efficient, they often come at the demise of industries that rely on the old ways of life. Technology change occurs rapidly within many industries across the United States; as a result, it has spawned new industries and business opportunities. However, many traditional industries struggle to keep up and ultimately lose out in this new wave. Industry stagnation As competition becomes fiercer, due to the factors just mentioned, and other internal and external reasons, businesses often need to cut costs in all production areas to reduce prices and garner sales. However, it comes at the cost of implementing industry and product R&D. As a result, businesses often put off capital and technology investments, making it more difficult to improve production efficiencies, which ultimately cost them time and money. As a result of this vicious cycle, many industries end up stagnating and dying a slow death as others catch up, overtake and prosper. Ranked in order of industry size at the end of 2010, the following table outlines the 10 dying industries. As indicated in the table, over the past decade, each industry has experienced a severe drop in revenue and a significant decline in the number of establishments. Additionally, these industries are also forecast to continue dwindling in size during the foreseeable future. While these industries are all facing negative numbers, it does not necessarily mean that the players that operate within them are also close to failing. Firms that protect their strength in certain market segments, focus on niche opportunities and capitalize on a declining number of competitors can often reap the greatest rewards as sole operators, obtaining market survival and profitability. Information and Telecommunications The information and Telecommunications sector is characterized by rapid technological change. Of the 29 industry reports covered by IBISWorld within the information sector, most are in decline, largely because of rapid technological change. Of course there are exceptions to this trend, including software publishing, VoIP, Internet service providers and search engines (which are some of the innovators behind this change). Still, other than those technologically advanced industries, most have very difficult operating conditions. The wired telecommunication carriers, newspaper publishing and video postproduction services industries are suffering the most. Of the 10 chosen industries that are dying, wired telecommunication carriers is by far the largest, at $154.0 billion in turnover. While this number may sound sizeable, it’s considerably smaller than the $341.8 billion at the end of 2000. Since then, this industry has declined in every year, and it is now close to 55 percent smaller than it was at its peak; with an additional decline of 37.1 percent expected in the next six years. While major players like AT&T and Verizon continue to dominate the industry, they are generating lower returns each year as consumers switch to VoIP and wireless products. Video postproduction is the second notable information industry that is exhibiting steep declines. Technological advances, particularly involving the widespread adoption of digital media has adversely affected the industry’s range of services, from editing and animation to archiving and format transfer. While the use of this technology is becoming widespread, it is undercutting the industry’s services since production companies can now do much of the work in-house. Finally, the newspaper publishing industry is fading, and this trend should not be news to many. The industry has clearly been affected by technology; while part of the industry and companies may have benefited from it, the overall business model is struggling to survive. In particular, advertising dollars have shifted dramatically away from newspaper publishers and moved toward the Web, which has greatly reduced revenue streams. As a result, operators are also subject to forms of industry stagnation. The Future of Dying Industries While much of this discussion may not be forward looking, it certainly opens an eye to some of the industries that are struggling to survive. The DVD, game and video rental and newspaper publishing industries may be obvious, but there are many others of which some are unaware. Furthermore, each and every one of these industries has been impacted by one or more of the three detrimental industry factors, including external competition, advances in technology and industry stagnation. It should also be noted that while these industries all have negative numbers, it does not mean that the players that operate within them are also about to succumb. Industry operators that protect their strengths in certain market segments, focus on niche opportunities and capitalize on the dwindling number of competitors often reap the strongest rewards of sole operation, market survival and profitability. An example of this trend is Berkshire Hathaway, which holds a prominent position in one of the top dying industries: textile mills. |