Monday, March 17, 2008

Observations: Do printers fit with this new “Free!” thing?

Do printers fit with this new 'Free!' thing?

Chris Anderson, author, journalist, and editor-in-chief of Wired magazine, is on to a new trend. His cryptic label for the trend is simply "Free," and as I read about it and sorted through all the associated comments and discussions, I had that familiar feeling that once again an important new technology and social trend was on the horizon, but what wasn’t as clear is whether printers get to "come outside and play."

By way of context, Anderson is the author of the famous article, "The Long Tail", that originally appeared in Wired magazine in October 2004, and which he then developed into a full-length book which was published in 2006 entitled, "The Long Tail: Why the Future of Business Is Selling Less of More." Anderson also has a blog, thelongtail.com, where he has been introducing readers to his new ideas, which center around the tremendous growth in "free" products and services and the business models that rationalize and support them. He is also working on a new book for publication in 2009, and the cover story of the March 2008 Wired magazine features a 6,000-word preview entitled, "Free! Why $0.00 Is the Future of Business."

Coincidentally, this business and marketing trend was included, by name, in the Lyra 2008 Imaging Symposium. Steve Hoffenberg, director of Consumer Imaging Research for Lyra, hosted a panel and gave a presentation called "Beyond Prints: Evolving Photo Printing Opportunities," where he used Long Tail concepts to describe myriad personalized specialty items now available to photo-loving consumers—think t-shirts, mugs, tote bags, and mouse pads, among others.

With that connection in mind, it is fascinating that Anderson’s Wired article starts out in similar fashion to a presentation from the Lyra 2005 Imaging Symposium. In that speech, entitled "Digital Imaging Business Model Evolution," the speaker took on the razor-and-blades model that is so often used in the printing and imaging industry with respect to the way printers and supplies are priced. He compared the hard copy business, literally, to the real razor-and-blades business and its new product introductions and price points over the last few decades, as implemented by Gillette, the industry leader.

In Anderson’s article, though, he has gone even farther back, and in fact leads off his piece with a description of the company’s namesake, King Gillette, and the original innovation of razor blades as an improvement over the incumbent straight razor near the turn of the 20th century. Starting with the real innovation, business-wise, of the idea of giving away the razor and selling the blades, Anderson uses examples such as free cell phones and their monthly service plans and video-game consoles and the games themselves, as high-tech examples that are carrying on the legacy of Gillette. Regrettably, Anderson never quite brings printers and supplies into the discussion, which prompted memories of our industry being left out of major press stories as described in my recent Observations column. Being aware of this "free" trend, and representing the printing and imaging industry, I am here to “elbow in” on this newest phenomenon, and as Anderson points out in a February 25, 2008, post on his Long Tail Web site, "This is the start of my explorations of the world of FREE, not the end."

Some historical industry anecdotes of our own help make our case for the inclusion of the printing and imaging industry in the "free" discussion. One instance that comes to my mind involves Dell and the firm’s entry into the printer business with a lineup of competitively priced ink jet and laser printers (Observer, 4/03). Not long after Dell's printer launch, industry rumblings surfaced about Dell PC customers receiving mysterious "free" ink jet printers with the computer shipments they ordered through Dell’s direct channel. It was surmised by some that this was not a mistake, but rather an effort to build an ink-hungry installed base of Dell printers. After all, if it makes sense to follow a strategy of selling a low-end ink jet printer and taking a small loss, offering "free" printers is really only just taking a little bit more of a loss.

While I have no data to know if Dell's practice of "free" printers continues, the next closest thing is the common 'free printer, after rebate" offer. These offers are not hard to find and are typically included with the purchase of a desktop PC, laptop computer, or digital camera.

Reflecting on our business, what is the future of the practice of free or nearly-free "cross-subsidized" printer sales, in the parlance of Anderson? No less formidable industry players as Kodak and Xerox made well-documented attempts to reverse the balance, with higher-priced printers and lower-priced supplies during the last year, and have so far experienced mixed results, at best. Other companies, continue to struggle with how to participate in the very low end of the ink jet and laser printer markets. And while the question of whether to participate at all remains, the attraction seems to be nearly irresistible over the long term for many printer OEMs.

Bringing the discussion back to Anderson and his "Free" theories, the article goes much farther in describing and categorizing various free-enabling business models and asserts that the cross-subsidized razor-and-blades idea is only the beginning. As applied to Gillette, Anderson looks ahead and speculates: "It’s as if the price of steel had dropped so close to zero that King Gillette could give away both razor and blade and make his money on something else entirely. (Shaving cream?)" In fact, this remark brings us to a hypothetical question for the printing and imaging industry that is maybe not quite so theoretical as it used to be: With nearly-free toner and/or ink to go along with nearly free printers, on what other profit-generating business can the hard copy industry base its future?
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Links
jimlyonsobservations.blogspot.com/2006/07/observations-razor-and-blade.html

techdirt.com/articles/20080202/210638158.shtml
techdirt.com/articles/20080225/183427355.shtml
techdirt.com/articles/20080222/174809327.shtml
wired.com/techbiz/it/magazine/16-03/ff_free
thelongtail.com/
wired.com/wired/archive/12.10/tail.html

2 comments:

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Databazaar Blog said...

Xerox still gives away its Phaser solid ink printers free of charge to qualifying businesses (i.e., companies that print a lot).