Steer Clear of These Dying Industries
Jon is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Let's face it, the world is always changing. With change comes the rise of new industries, and the demise of old ones. Here are some industries that are slowly dying off, and some of the companies that might be going down with them.
I remember a few years back when my friends and I were in college, one of them was studying journalism. He informed me of the dire situation facing the newspaper industry. And indeed they have been in a tough spot: Newspaper revenues over the last eight years have fallen over 50%.
With people on the Internet virtually 24/7, the need for print newspaper has greatly diminished. It seems that the only people who still subscribe are people who "just like paper." I must applaud News Corp (NASDAQ: NWSA) for not taking the shift lying down. In a valiant effort, they launched a newspaper for the iPad in 2011 called The Daily. Murdoch correctly saw that the future was not in print, but in tablets. Unfortunately for News Corp, it turns out that consumers still aren't interested in paying for their news when they can get it for free. The Daily released its last edition on Dec 15.
This trend doesn't seem to bode well for the New York Times Company (NYSE: NYT) either:
Over the past ten years, this trend has continued to chip away at their revenue and their net income. To make ends meet they have been forced to sell off assets. In a desperate move, they now charge to access the New York Times online. However, I think that News Corp already proved that people aren't looking to pay for news that they can get for free.
As for the print newspaper industry, revenues are expected to fall another 19% by 2017. Not the kind of environment you want to be doing business in.
Physically DVD rentals are disappearing at an alarming rate...if you like DVDs. If you're a Netflix (NASDAQ: NFLX) investor, then you probably already knew that DVDs were on the decline. Netflix's CEO Reed Hastings is known for being a visionary, and he sees the future of media in streaming.
While customers may prefer to stream their movies instead of renting a disc, and while Netflix may be on the cutting edge to give them what they want, it's important to realize that streaming isn't as profitable for Netflix as their DVD business. As they continue to lose DVD subscribers to streaming, look for profit margins to keep falling as well.
Also vulnerable is the Blockbuster-killer: Coinstar (NASDAQ: OUTR). I have historically been a bull on the RedBox parent company, but I must admit that the numbers demonstrate the eventual demise of DVDs. For a company that generates the majority of profits from DVD kiosks that's not good. Still, Coinstar may have a trick up their sleeve. It's called RedBox Instant, and it allows RedBox to get into the streaming arena, undercutting Netflix by $2.
Some will point out that RedBox Instant doesn't have nearly the selection that Netflix has. And that's true; the match isn't even close at 4,600 to 60,000. But may I remind you that RedBox never had the selection of Blockbuster, and we all know who won that battle. Consumers are mostly interested in new titles, and they are interested in saving money. RedBox Instant can offer both of those things.
Physical DVD rentals are expected to keep falling over 50% over the next five years.
It seems like every day I see more and more people barefoot, but that's not what I'm talking about. Shoes made in the USA are vanishing. 95% of shoes sold in the United States are now made overseas.
But in this case, I actually see this as a positive for some companies. By being made in USA, some companies can actually carve out a niche. Such seems to be the case for Wolverine World Wide (NYSE: WWW). For 125 years, these boots have been made on U.S. soil.
Wolverine, in the always difficult shoe industry, has been able to grow revenue and dividends consistently over the last 10 years. As more and more shoes get shipped overseas, I foresee Wolverine continuing to grow revenue, as customers seek the quality of an American product. Boot costumers aren't exactly known for wanting something cheap.
A Fool's Conclusion
Some industries are declining rapidly and are taking companies down with them. The stage is cluttered with companies that stand to lose a lot over the coming years. But what is a threat for one company can be an opportunity for another. Some companies are positioned to take advantage of changing economic conditions and are poised to profit--the trick is learning to identify them early.
Jon Quast has no position in any stocks mentioned. The Motley Fool recommends Netflix. The Motley Fool owns shares of Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!