Printer Industry Switching from Razor Blade Model -- Is It Too Late?

(MoneyWatch)  For years the printer industry worked on the razor marketing theory: Give away the devices and make money selling the inks. Eventually that became practically giving away the printers. But it's starting to look like those days are gone. Here's some of the evidence:

• When discussing his company's prospects for next year, HP CEO Mark Hurd said that revenue in printing, which category he expected to grow, to come more from hardware than supplies. And the company has been forced into an advertising campaign stating that consumers can get many more pages of printing from its inks than low-cost substitutes.
• Kodak is running a marketing campaign in which it is stressing the new low price of its inks, spending $30 million on a campaign earlier this year.
• I've heard rumors through the grapevine, as yet unconfirmed by the company, that Lexmark has also been considering lowering ink pricing.

And the flip side of lowering ink price? Trying to bolster hardware prices. When you think about it, the two are inversely tied at the hip.

Part of the reason that ink printer vendors decided to slide down the razor blade of business life is that they had managed to carve out an exception in the 1966 Fair Packaging and Labeling Act. Ink is one of the few exceptions to the requirement to state quantities on consumer packaging. It became a great place to bury the effective price body, because no one could tell. Only as more people started using printers frequently, the constantly liquid drain began to become noticeable.

In addition, the printer vendors are facing a potential landmine of a problem. Many people have become happy to store images online and view photographs on screens. As the cost of creating paper copies goes up, the impetus to move even more thoroughly to browsers also increases. At least on the consumer side, printer vendors have digging a deep hole for themselves, actively, although not intentionally, encouraging people to defect from paper to pixel.

In a way, it is the same problem facing publishing. When you have constructed your business model to depend on trapping people into essentially paying for commodity products, you are suddenly in trouble when the customers find ways to do without. Perhaps more printer vendors will lower ink costs and move to more rationally-priced hardware, but, as consultant Bob Sacks puts it about publishing, they may be fighting the last war. And what's even worse for them -- unlike publishers, who have something of that consumers may still value -- the printer vendor may not.

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