We often assume change is immediate – for instance, the moment the motor car was invented, all the horse cart makers went out of business – what usually happens though is the two technologies or industries sit side by side for some time and the old industry may even continue to prosper for sometime and the new methods struggle.
Eventually though the newer technology takes over and the older one falls away quickly, leaving slow to change incumbents with an irrelevant business model.
Illustrating this, two fascinating posts by Michael DeGusta on his blog The Understatement tracks two major trends in the US newspaper and record industries, noting how the sectors are now at 1960 and below 1973 levels respectively.
The record industry
Michael’s tracking of per capita recording sales is striking both for how technology, trends and musical tastes have shaped the record industry along with the predicament it now finds itself in.
The 1970s show how the recording industry adapted, we see sales start the decade in decline until a sharp uptick in vinyl sales happens in the late 1970s, probably driven by the heavily hyped “rock opera” and concept albums foisted on us by the likes of Pink Floyd and the Electric Light Orchestra.
It’s interesting that during this period cassette sales largely flat lined, as digital revenues have today. As a child of that late 1970s era, we used cassette recorders – mine won in competition at a jeans shop in outer suburban Melbourne – to tape stuff off the radio and jerryrig with record players so we could create mashups of Alice Cooper and Skyhooks.
Cassette revenues eventually grew, but the the Compact Disk quickly took the growth off the cassette tape and drove the record industry to new highs, probably as people replaced their vinyl collections with CDs that weren’t easily copied through the 1980s and much of the 90s.
The peak of CD sales was hit in the late 1990s, which is almost certainly due to the arrival of personal computers equipped with recordable CD units. All of a sudden, we could go back to copying the music we’d already bought.
To make things worse, the rise of the World Wide Web meant we suddenly didn’t have to go through the gatekeepers – the record stores, radio stations and magazines – to find the music we wanted.
For a while the record industry fought back, even seeing a minor resurgence in 1999 and 2000, but then the rot sets in. The tipping point was clearly in 2001 and can probably be traced to the online streaming services, including YouTube, and the rapidly maturing peer-to-peer services.
The only solace the record industry in its current form can hope for is to see a surge in digital sales like they saw with cassettes in the mid-1980s. It’s difficult to see how that can happen unless they can quickly strike some very favourable deals with Apple and other online distributors.
Newspaper advertising
Print media’s performance over the last fifty years has been one of success until 5 years ago. Despite most of us turning from newspapers to broadcast television for our news through the 1960s and 70s, revenues stood up.
From the 1980’s there was a slow decline and in a few years early in the new millennium it even looked like the Internet wasn’t affecting revenues and the new streams from online advertising were actually increasing overall income.
Then in 2005, the tipping point was reached as classified advertisers, particularly employment and real estate, fled to online competitors with the display buyers not far behind.
For newspaper publishers, that their online revenues have barely grown in the last five years most be the most worrying aspect of the collapse in their income. Their online strategies simply aren’t working.
What this means for other industries
This “tipping point” pattern is typical when we see technological shifts. For various reasons – customer inertia, government regulations, uneven distribution of the new tools – a game changing technology usually takes time to be adopted and usually goes through a process best described by the Gartner Hype Cycle.
New technologies and ideas rarely change industries or societies overnight, but once a technology reaches maturity and mass acceptance, the barrier eventually gives gives and people quickly move across to the new way of doing things.
We see this in the record industry – particularly in the switch to cassettes, CDs and then collapse as the net takes over – then again in the newspaper industry.
These two industries though are just examples, the same process is happening to many others. One good example is the phone directory business where the tipping point is happening right now as consumers and businesses move online and away from printed directories.
That many businesses still haven’t figured out this change in consumer behaviour indicates they too are being blind sided by tipping points that could leave their ventures stranded by history.
All of us have to understand how these changes will affect our livelihoods and trades. Are you looking at how your business is affected by the rise of the net and the end of the cheap credit?
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