5 Industries That Are Doomed to Fail

BOSTON (TheStreet) -- There's a constant turnover of winners and losers in business, and some face the fate of the proverbial buggy-whip industry: obsolescence.

Makers of compact and computer discs, and retailers that rent DVDs and video games (think Blockbuster) are on the short list of industries that may evaporate, and a handful of others, such as soda-pop companies and laundromat suppliers, will endure challenging times. That's according to a ranking by IBISWorld, a Santa Monica, Calif., publisher of industry-specific research and market analysis.

What defines their poor prospects are declining life cycles, high competition, weaker consumer demand and technology changes, the research firm said. IBISWorld's rankings also include a weighting for growth potential, economic sensitivity and industry structural risk.

Here are five of the riskiest industries as measured by IBISWorld:

5. The recordable-media-manufacturing industry carries the highest risk of any of those ranked by IBISWorld, based on an outlook for sharply declining revenue as consumers switch to online sources for their music and movies.

Makers of physical media such as optical and magnetic discs, audio and video tapes, CDs, DVDs and Blu-ray discs are doomed. The industry is expected to record revenue of $7 billion this year, but see annual declines of an average of 3% per year through 2016.

The chief competition is from cable TV and video-on-demand services. Imation ( IMN), an Oakdale, Minn.-based manufacturer of data-storage media products and consumer electronic products, is one of the industry's biggest players.

4. The wired telecommunications carrier industry is made up of local, long-distance and international phone-service providers that rely on hard-wired (think telephone lines) technology to send their signals. Its threat comes from the worldwide shift to mobile communications, led by cell phones.

"In recent years, the continuous emergence of new technologies, like naked DSL (digital subscriber line) and voice over internet protocol (VoIP) technologies, and rapidly falling cell phone prices are making this industry particularly risky," IBISWorld says.

But the industry is seen maintaining a core business, as its high barriers to entry, such as stringing new phone lines, means it doesn't face new competition.

The big players in the industry are AT&T ( T), Verizon ( VZ) and CenturyLink ( CTL), and each has diversified into wireless technologies to keep their businesses profitable.

Indicative of the industry's changes, Verizon's wireline division, which includes business- and home-telephone services and its FiOS television offering, continue to contract as more customers made the switch to wireless phone service. In the third quarter, Verizon's wireless revenue fell 1.3%, but it still was a $10 billion business.


3. Soda production, or the manufacture of carbonated soft drinks, now a $17 billion industry, is seen shrinking by 2% per year over the next five years as consumers switch to other, and in most cases, healthier types of beverages.

A core of Coca-Cola ( KO) and Pepsi-Cola ( PEP) drinkers is expected to remain loyal to their brand, but demand for carbonated soft drinks is seen slowing due to increased competition from energy and sports drinks and ready-to-drink teas and coffees, not to mention bottled water.

Also hurting their prospects is that some state and local governments have proposed or enacted taxes on soft drinks and eliminated them from schools, in order to fight obesity and diabetes. For example, Washington state has imposed a 2-cents-per-12-ounce tax on carbonated beverages since 2007.

Alternative beverage categories have also stepped up their marketing campaigns and gained market share. In 2011, Coca-Cola dominated the carbonated soft drink market in the U.S., with a 16.7% share, followed by Pepsi-Cola at 9.2% and Diet Coke with 9.1%.

These companies have diversified their beverage product offerings to offset declines in carbonated soft drinks but are also seeing steady growth in foreign markets for their carbonated products.

Dr Pepper Snapple Group ( DPS) is the third-largest flavored carbonated soft drink maker in the U.S.

2. The coin-operated laundromat and dry-cleaning industry, with revenue of $4.2 billion annually, is seen shrinking by 1% per year over the next five years. Competition from consumers' use of household washers and dryers and a decline in the use of drop-off and pick-up laundry and dry-cleaning services has resulted in an industry-wide decline in revenue.

Laundromats and dry cleaners, big users of electricity, are also facing rising utility costs that are hurting profits and squeezing some people out of the business. Big industry-equipment providers that are threatened by this trend include Coinmach and Mac-Gray ( TUC).


1. The DVD, game and video-rental industry, which includes subscriptions for mail-distributed and in-store media rentals, is being challenged by streaming media, video on demand and online downloads.

Current annual revenue of $6.6 billion is seen declining by 13% annually over the next five years. The industry is also being hurt by reduced consumer spending.

In addition, the increase in households with Internet connections will further hurt rentals.

The leading industry players include Netflix ( NFLX), which began as a mail-order DVD-rental business, but is in the process of shifting more to an online business, and Coinstar ( CSTR), which owns the Redbox DVD-rental service.

Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.

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