[credit provider=”Flickr/Jesse Terwilliger” url=”http://www.flickr.com/photos/terwilliger911/2353922238/”]
As a supplement to last week’s blog, I thought it might be a good idea to discuss some industries that small businesses should attempt to avoid. This economic recession has brought a plethora of business failures and it’s safe to assume that once the economy gets roaring, many of these failed businesses will come back and be very successful. However, some businesses will never recover to what it once was. History has shown this to be true.The telegraph industry was decimated by the Great Depression, ultimately getting replaced by new technology (telephone) coming out of that Depression. Coincidentally, that “new technology” is getting replaced by newer technology (wireless phones) coming out of this recession. Technology is what leads the change, recessions/depressions simply accelerate that change.
So, rather than listing every industry in decline, I thought I’d just focus on one major industry (at least for this blog) and the businesses that come out of it.
The Paper Industry
Since the Gutenberg printing press (or Chinese printing press depending upon your preferences), paper has been THE form to store and communicate any piece of information. This is no longer true and we are in the midst of one of those revolutionary periods in human history where innovation changes all facets of life. Like the wheel, gunpowder, and steam engine before us, our digital technology is changing everything. Anybody looking to invest in anything dealing with paper will suffer the consequences of not seeing this radical transformation.
Borders is in the midst of liquidation. Barnes & Noble is continuing to expand. The difference? Barnes & Noble took an aggressive approach in tackling both the Internet and E-reader market. Borders, on the other hand, focused on its brick and mortar (or better yet, its paper) business. Prior to this millennium, these bookstore giants only had to worry about the neighbourhood bookstore, but today, their entire industry has transformed. Although the general public has been hesitant to fully adopt e-reader technology, it is only a matter of time before paper books become a novelty.
Public libraries are beginning to take away bookshelves and replacing them with computer kiosks and study carrels (some have even taken the radical step of eliminating books altogether and only issuing books when patrons demand one). Schools and universities are beginning to move away from requiring paper textbooks and instead ask students to order digital textbooks. The entire legal profession, which was once dependent on paper books, is raising an entire new generation of lawyers where books are no longer necessary to practice law (say “bye bye” to those law offices where the lawyer is sitting in front of a wall full of books).
neighbourhood bookstores may still survive, like a record store, but these stores will remain within a niche industry with little room for growth.
2. Book, Periodical, and Newspaper Merchant Wholesalers
People are addicted to news. Whether it is about the latest political debate or reality star drama, the public wants to know what is going on. However, paper news is no longer the source. Instant gratification and the 24 hour news cycle fuel the news industry and unfortunately, paper news cannot function under this new reality. What is newly printed today was news yesterday. Our Twitter culture cannot accommodate printed news. If it can’t be said in 140 words, then it isn’t worth saying, and most printed news definitely uses more than 140 words for an article. Cable news channels, radio commentary shows, blogs, and online news sources have replaced the public’s dependence on printed news and so these businesses and the businesses that depend on them are quickly disappearing.
3. Database and Directory Publishers
When was the last time you picked up the yellow pages? Probably right before you’ve heard of a thing called Google. In fact, those born in the past decade probably won’t even know what “yellow pages” refers to. As more and more search engines advance in their sophistication to find the things you are looking for, and as more and more websites help address the needs of the consumer (e.g., where can I find the cheapest Mexican restaurant?), database and directory publishers will no longer have any more demand.
Most people neglect photofinishing when thinking about paper industries, but it also should be included. Prior to digital technology, film and film processing was a huge industry. Without fail, almost any and every strip mall in America had a One-Hour Photo store prior to this millennium, but today, these stores and kiosks are virtually extinct. colour printers, digital frames, and user friendly software make a photofinishing service unnecessary.
Include Video Postproduction to this section. As video cameras are becoming more sophisticated and as editing software is becoming more accessible, video postproduction is becoming as popular as full service gas stations. Simply put, we could do it ourselves.
5. DVD, Game & Video Rental
Although not a part of the paper industry, the DVD, Game & Video Rental industry should be included. Although data is not technically printed onto paper, data is “printed” on some tangible medium that allows the products to be easily sold. However, new advances in digital technology, particularly wireless technology, have obliterated this industry. There simply is no appeal for a person to visit a separate store to find a DVD/video game. With continual improvement to our infrastructure, movies, music, and video games can be downloaded into any device at any location. Beyond rentals, DVDs (and Blu-rays) themselves will become obsolete as digital data can be easily stored in an external hard-drive.
The video games industry is also transitioning away from game consoles to free-to-play models (something that has already happened in Asia a decade ago). Companies like Zynga, Nexon, and Tencent are reaching $1 billion in revenue per year on merely “selling” free-to-play games (e.g., Farmville, MapleStory Adventures). Console games (i.e. Nintendo, Xbox, Playstation) still remain popular in the U.S., but it appears their market share in the video game industry is decreasing quickly.
6. Motion Pictures and Video Distribution
Motion pictures and video distribution is generally not considered a paper industry, but as a medium that carries data through a tangible product, this industry should be included in this discussion. An 80-minute feature film reel costs about $2,000. Multiply that by the number of movie theatres playing the movie and you begin to realise how expensive producing movie reels can be. Now imagine taking the same movie and transporting it digitally through a reusable hard-drive that costs pennies. Obviously, the choice of distribution becomes easy. The same logic can be applied to home viewing. Why spend a huge investment in creating DVDs and Blu-rays when it will be so much cheaper to send the info directly to the consumer as a digital feed?
There are still some drawbacks to digital technology. Digital projectors are very expensive compared to film projectors and with the constant improvement of digital projection, digital projectors have to be replaced at a much faster rate than film projectors. Also, storage of digital information remains a major hurdle for engineers. Be it optical discs (CDs, DVDs, blu-rays), magnetic hard drives, or digital tapes, data on these mediums deteriorate within a hundred years whereas a properly stored film reel can last centuries.