Is Kodak Starting an Inkjet War?

By Ed Sutherland | Posted February 07, 2007

Kodak may have fired the first shot in the inkjet wars. Analysts said the introduction of three printers that use much cheaper ink will pressure rivals to respond.

Unveiled in New York, the three All-in-One EasyShare printers boast black and color ink cartridges priced at$9.99 and $14.99, respectively. Brand name inkjet cartridges usually cost around $30. The ink prices will allow consumers to produce 10-cent prints.

Kodak said the three printers, priced $149.99, $199.99 and $299.99, will be offered in March first exclusively at BestBuy, then online.

But beyond the consumer impact, Kodak's entry into the inkjet market could reshape a high-profit industry analysts say is worth $32 billion worldwide.

EasyShare
An EasyShare to launch an ink war.
Source: Kodak

"After today, the inkjet market will never be the same," Kodak CEO Antonio Perez said. The company believes the high cost of ink limited more printing. The announcement comes as a long-successful "razor and blades" sales campaign is under increasing threat.

Like the companies that made more money selling replacement blades than selling the razor, market-leading printer companies, including Hewlett-Packard Epson and Canon have enjoyed up to a 70 percent profit selling ink.

But that revenue is under threat by lower-cost, after-market ink. Charles LeCompte, president of Lyra Research, said after-market ink represents 30 to 40 percent of the market. In China, non-brand-name suppliers sell 90 percent of the ink.

HP was a "little perplexed" by Kodak's "unproven" technology, Tuan Tran, vice president of marketing for the printer maker's Imaging and Supplies division, said.

For consumers, the Kodak announcement will result in less hesitancy in printing digital pictures at home. The cost of home printing, which is now around 25 cents per photo, will equal that of online printing services, said LeCompte. Kodak's entry into inkjet printing forces competitors to act, he added. "They can't stand still," he said. "We'll likely see a price war."

While we won't likely see cheap inkjet printers jump $100, "they'll fade out lower-priced products over time," said the analyst.

One result of the Kodak decision will be less bundling. Ian Hamilton, printer analyst with Current Analysis, said 40 percent of inkjet printers are now bundled with a computer or other device. Kodak decided to forgo bundling, an area that rarely translates into ink sales.

Other vendors have tried similar price cuts, but the cartridges contained less ink, InfoTrends Director Bob Palmer said.

Can Kodak gain market share? Palmer said Dell bought its second-place status in the inkjet market by undercutting competitors.

It's "absolutely vital" Kodak succeed in its inkjet printer bid, said Lecompte. Revenue from film for Kodak has shrunk to 25 percent. Without digital SLRs — the only profitable segment in the digital camera market — printers become increasingly important for Kodak.

"They've bet the ranch on this."

Adapted from Internetnews.com.

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