10 US Industries to Rise and Fall in 2017

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1 December January US Follow Industries on head Set on to Master Rise and page Fall Ain 2017 December US Industries to Rise and Fall in 2017 By Madeline Hurley, Madeline LeClair, Rory Masterson, Kelsey Oliver, Chrystalleni Stivaros and David Witter Demographic shifts and changing consumer preferences will continue to influence the business environment in the new year. The upcoming year is expected to be exciting and challenging for US industries From high-profile mergers and acquisitions to the Olympics and a historical US election, 2016 has been a whirlwind of a year. In addition to larger political and cultural trends, decade low oil and steel prices, falling unemployment, and rising technological advancements have contributed sizably to both the growth and decay of a wide variety of industries this past year. Demographic shifts and changing consumer preferences have also influenced the business environment, especially as the population ages and millennials gain more purchasing power. The upcoming year is expected to be similarly exciting and challenging for US industries, as new regulations, innovations and shifting consumer preferences yield new opportunities and roadblocks. Therefore, IBISWorld has compiled a list of US industries expected to expand and decline in Industries poised for growth Cementing Oil & Gas Well Services Oil and gas-centric industries endured historic falls over 2015 and Despite record production levels, low sales prices and curtailed exploration activity slashed industry revenue up and down the value chain. The Cementing Oil and Gas Well Services industry (IBISWorld report OD5985) took the brunt of the pricing headwinds, reaching record levels over the five years to 2016, peaking at $3.7 billion in 2013, before plummeting 64.6% in 2015 and an additional 41.1% in Since this industry plays an integral role in well completion, decimated exploration budgets for the nation s oil and natural gas drillers cratered industry revenue. According to Baker Hughes, the United States active oil and gas rig count peaked in November 2011 at 2,026 rigs, before falling precipitously. The low came in May 2016, when there were only 404 active rigs in the country. This level is the lowest in the 67-year history of rig counts from Baker Hughes. However, the Cementing Oil and Gas Well Services industry stands to rebound in In the last six months, the US rig count is up more than 45.0%, reigniting demand for industry services. With global oil and gas prices expected to rise 21.9% in 2017, demand is expected to grow for the first time since IBISWorld expects industry revenue to rebound 62.2% over 2017 to reach $1.2 billion. Despite this rapid rise, revenue will likely remain only a fraction of its 2013 high. Digital Advertising Agencies The Digital Advertising Agencies industry (IBISWorld report OD5889) info@ibisworld.com

2 December has benefited from the rapid switch from traditional print advertising to digital advertising. According to Cisco and IBISWorld estimates, internet traffic volumes are expected to increase at an annualized rate of 20.2% over the five years to As more consumers generate website traffic through the use of smartphones and tablets, many businesses have purchased digital advertising services to build brand awareness across multiple screens and platforms. This industry is constantly adapting and using video streaming sites such as Hulu, providing more digital advertising opportunities; for example, viewers are able to customize what type of advertisement they would like to view prior to watching their video. The trend of customization and the automated targeting of marketing materials are making advertising more effective and less intrusive to users, thus allowing advertisements to become more integrated with users online experience. Additionally, mobile technology, such as location tracking, has provided the industry with new methods to advertise products and services over the past five years, which will likely become more prevalent in the coming year. As a result, IBISWorld expects revenue for the Digital Advertising Agencies industry to grow 9.9% in Pet Grooming & Boarding The Pet Grooming and Boarding industry (IBISWorld report 81291) consists of companies that provide pet care services, such as boarding, grooming and training. Industry revenue is largely driven by per capita disposable income, the number of pets and time spent on leisure and sports. Industry revenue is anticipated to rise more rapidly in 2017 alone than over the five years to 2021 due to stronger growth in the number of pets (measured as cats and dogs) and per capita disposable income. In 2017, growth in the Index US oil and gas production index Year number of pets is expected to increase 2.6%, compared with an annualized 2.3% growth rate over the five years to With more pets, the number of potential customers for the industry is expected to increase. Additionally, per capita disposable income is expected to grow 2.4% in 2017, compared with an annualized 2.0% growth over the five years to Rising per capita disposable income benefits the industry by providing owners with more money to spend on their pets, especially for luxury services. To capitalize on rising incomes and entice high-end clientele, many operators are expected to add premium services such as all-natural grooming treatments and live pet streaming. Overall, in 2017, IBISWorld expects industry revenue to grow 9.2% to total $7.9 billion. Carpenters Due to its heavy dependence on housing and construction markets, the Carpenters industry (IBISWorld report 23835) has rapidly improved over the past five years. As housing starts have recovered, demand for carpentry services has grown substantially, especially given that roughly three-quarters of the industry s revenue is generated from work on new and existing homes and apartment buildings. In fact, the 21 SOURCE:

3 December industry has recovered all the losses it incurred during the recession; IBISWorld expects industry revenue to grow at an annualized rate of 2.1% to $22.9 billion over the five years to In 2017, these trends are expected to continue. New construction activity, in particular, will drive industry demand; housing starts are forecast to grow 6.7%, while the value of residential construction is expected to grow 2.0%. These trends are anticipated to boost industry revenue by 4.4% in Increased per capita disposable income and growth in private spending on home investments are expected to contribute to the continued improvement of the Carpenters industry. Specialist Doctors The Specialist Doctors industry (IBISWorld report 62111b) is poised for strong growth in 2017, thanks to a burgeoning elderly population and increasing access to healthcare. Industry operators provide specialized medicine other than primary care, such as anesthesiology, oncology and ophthalmology, or surgery. Over the past five years, the industry has benefited from an aging baby boomer population, many of which have more complicated, chronic conditions and comorbidities, which require multiple treatments and medications. According to IBISWorld estimates, the number of adults aged 65 and older is expected to increase at an annualized rate of 3.1% over the five years to 2017, making the US population older than at any previous point in its history. Additionally, under the Patient Protection and Affordable Care Act, an increasing number of individuals with healthcare insurance coverage will boost demand for industry services. In 2017, as healthcare reform enters its fourth year of implementation, industry revenue is expected to rise 4.7% to reach $263.5 million. Industries set to decline DVD, Game & Video Rental The DVD, Game and Video Rental industry (IBISWorld report 53223) is engaged in renting physical copies of movies, computer and video games and other discs for home entertainment. Over the past five years, industryspecific revenue has steadily contracted at a staggering annualized rate of 8.5%. Successive quarters of weak performance for industry operators can be attributed to increasing reliance on digital outlets such as Netflix streaming, Hulu, Amazon, Comcast and other digital media Five industries poised for growth in 2017 Report # Industry 2016 Revenue 2017 Revenue* Growth (%) OD5985 Cementing Oil & Gas Well Services , % OD5889 Digital Advertising Agencies 12, , % Pet Grooming & Boarding 7, , % Carpenters 22, , % 62111b Specialist Doctors 251, , % *Estimates SOURCE: IBISWORLD

4 December services, including pirated content. In 2016, overall industry-specific revenue is expected to fall 0.6%, with a more drastic decline of 2.2% to $3.1 billion forecast for This drop is due to the percentage of services conducted online increasing an expected 4.1% in As consumers continue to pivot to streaming subscription services, major industry companies, namely Redbox and Netflix (domestic DVD-by-mail services only) are expected to post hefty losses in Already, Redbox s revenue yearto-date (YTD) has dropped 15.4%, with total rentals down 18.1% compared with the previous period. Similarly, Netflix domestic DVD-by-mail membership services have dropped 16.0% YTD. In 2017, industry-specific revenue for both companies is set for similar decay, as consumer preferences favor alternative forms of media consumption. Chemical Product Manufacturing A broad array of industry products usually shields the Chemical Product Manufacturing industry (IBISWorld report 32599) from significant revenue fluctuations. The variety includes custom resins and chemicals used as inputs for other manufacturers, industrial chemicals such as water treatment compounds and home-use chemicals like those used in swimming pools, cat litter and fire extinguishers. Historically, one segment provided steady sales for this industry: photographic chemicals. Over the past decade, however, the proliferation of digital photographic implements and materials decimated sales of traditional photographic materials. According to data from the US Census Bureau, sales of photographic chemicals reached $13.2 billion in By 2014 (latest data available), that number fell to $7.5 billion. With growth from other segments unable to keep pace with lost demand from the photography market, % change Percentage of services conducted online Year IBISWorld expects industry revenue to fall an annualized 1.7% over the five years to The overall downward trend is expected to continue through 2017, with a further 0.4% revenue decline anticipated over the year. Wired Telecommunications Carriers Operators in the Wired Telecommunications Carriers industry (IBISWorld report 51711c) provide local and long-distance voice communication services via the public-switched telephone network. Operators also generate revenue by providing internet access and video services and wholesaling access to their networks. The Wired Telecommunications Carriers industry is facing significant pressure from superior wireless voice services offered by cellular phone networks and Voice over Internet Protocol (VoIP) providers. According to the Centers for Disease Control and Prevention, a 2015 survey showed that 47.7% of adults (people aged 18 and over) already live in a household with only wireless telephone service. As the number of adults and businesses with mobile internet capabilities grew significantly in 2016 and continues to increase in 2017, customers will keep eliminating their wired voice services, which account for 25.0% of industry 21 SOURCE:

5 December revenue. With consumers and businesses continuing to shift toward wireless communication services and away from traditional wire phones in 2017, industry revenue is expected to fall 1.8% to reach $162.8 billion. Revenue in 2017 will decline at a faster rate than revenue over the five years to 2021, which is forecast to decrease at an annualized rate of 1.6%. As more consumers make the switch, revenue decline will slow in the later part of the period due to fewer consumers with wired voice services to disconnect. Recordable Media Manufacturing The Recordable Media Manufacturing industry (IBISWorld report 33461) manufactures optical and magnetic media, such as CDs and DVDs, as well as the replication of software, audio, video or other data. Due to technological advancements and the growing percentage of services conducted online, more consumers have opted to stream media from the internet rather than from physical media over the past five years. As the percentage of services conducted online is expected to increase 4.1% in 2017, consumers are switching to downloading or streaming entertainment and software, rather than purchasing CDs or DVDs. Moreover, physical discs have become outdated, particularly in light of on-demand streaming services, such as Netflix and Spotify. Consumers and businesses are also choosing to store data and files on high-capacity flash drives or through online cloudcomputing services. Furthermore, the permeation of tablets and smartphones across the United States has further encouraged consumers to shift toward digital forms of media and away from industry products. Therefore, these trends have rendered the Recordable Media Manufacturing industry somewhat obsolete. Consequently, in 2017, IBISWorld expects industry revenue to contract 2.0% to total $22.9 billion. Hand Sanitizer Manufacturing Largely spurred by heightened consumer health consciousness and increased per capita disposable income, the Hand Sanitizer Manufacturing industry (IBISWorld report OD4250) has grown over the past five years. An industry focus on product marketing and shifting consumer interests spurred the growth of industry revenue, which IBISWorld expects to expand at an annualized rate of 4.7% to $194.8 million over the five years to Following a global Ebola outbreak beginning in mid-2014, consumers looked for convenient ways of maintaining healthy lifestyles and Five industries set to decline in 2017 Report # Industry 2016 Revenue 2017 Revenue* Growth (%) DVD, Game & Video Rental 3, , Chemical Product Manufacturing 39, , c Wired Telecommunications Carriers 165, , Recordable Media Manufacturing 2, , OD4250 Hand Sanitizer Manufacturing *Estimates SOURCE: IBISWORLD

6 December About IBISWorld Inc. Recognized as the nation s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on every US industry. With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions. Headquartered in Los Angeles, IBISWorld serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit or call cleanliness. According to data from market research company IRI, as cited by Adweek, sales of hand sanitizers shot up 56.0% in October 2014 compared with October 2013, mainly due to consumer fears about Ebola. However, as government regulations and competition increase, hand sanitizer manufacturers are expected to face several challenges. In late 2015, President Obama signed a bill that will ban sanitary products, including hand sanitizers, that contain plastic microbeads; these microbeads do not dissolve and therefore, create massive amounts of pollution. The law, which will go into effect on July 1, 2017, will eliminate many of the product lines industry operators have worked to promote, limiting industry revenue growth. Additionally, import competition will present a major threat to the industry, with imports projected to grow 6.7% over As regulation and import penetration increase in 2017, industry revenue is expected to decline 1.8% to $191.3 million. Contact: Media Relations media@ibisworld.com IBISWorld Sales & Subscriptions Phone:

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