A history lesson on Printer economics

In the 1980s personal computers came on the scene. It was adopted tepidly by corporate America and embraced by curiosity seekers. But a computer is only part of a paradigm. You need a method to share the information created inside the computer. 

Printers at the time were very expensive small refrigerator size devices and the domain of big business. Personal computers required a different solution. A PC at this time typically cost over $3,000 dollars. It was highly unlikely an individual would have the financial flexibility to spend nearly a thousand dollars on an associated printer. 

 

Along came a company called OkiData. They provided a cost effective dot matrix printer for a few hundred dollars. The printers were relatively cheap compared to the competition, reliable, small and simple to operate. They ran away with the PC market. But as often happens, something changed. The company became complacent and their next generation of printers killed their reputation in the marketplace.

Panasonic moved into the number one spot with their printers. Their printers were well made and aesthetically pleasing. Eventually Panasonic failed too with its upgraded offerings as more vendors entered the personal printer market.   

At the other end of the printer market was the corporate space. The small printer vendors were HP, Cannon and Minolta with their laserjet printers. The initial laserjet offerings cost $10,000 dollars. Funny how history is rewritten. I was looking up HP on Wikipedia. The article gave HP credit for the laserjet. I clearly remember when we got one of the first $10,000 dollar models from HP, it had marked on it the laser engine was by Cannon.

In the mid 1990s HP took center stage with personal printers. It dominated with its inkjet printers. HP has pretty much held that spot, though its market share today is considerably smaller. The major competitors today are Dell, Lexmark, Epson, and Cannon. 

Now begins the economics lesson.

The inkjet printers are generally cheap, often sold at or near a loss. HP makes a sizable portion of its profits from selling the replacement cartridges for the printers. They want you to buy cartridge refills often and only from them. The major vendors were facing a dilemma a decade ago. Third parties were manufacturing and providing cheaper inkjet cartridges for these printers. The major vendors responded by putting a chip in the cartridge that made certain it was one of their cartridges before it would work. The third parties reverse engineered the chip. HP responded by patenting the chip. The third parties responded by having trade in programs on genuine cartridges with the patented chip. They reconditioned them and sold them. 

The switch today is on to personal laserjets and away from inkjets. This creates a problem for HP and the other major inkjet vendors. They are going to lose inkjet cartridge sales and the lion's share of their printer revenue. Normally the major vendors would just close ranks in a cartel arrangement and agree to keep the laser cartridges high priced to offset inkjet cartridge revenue. But there is a fly in the ointment. The vast new markets for their products are in Asia. Asia is fond of duplicating technology. Therefore limiting the printer vendors monopolistic profit position.

The business model of HP and the major vendors is sacrosanct in terms of how profit is generated.  So look to inkjet cartridges increasing in price as fewer are required. Look for needing to replace the cartridges more often. Look for the laserjet cartridges to be outrageously priced and the print drums to need reconditioning quicker than it might.