Makers deny ink-jets have sky-high costs

Printers: Cartridges remain expensive, but last longer, work better.

May 31, 1999|By JEFF GELLES | JEFF GELLES,KNIGHT RIDDER / TRIBUNE

Buy a home computer system nowadays and the first thing you notice is how cheap they have become -- including ink-jet printers that produce crisp text and beautiful colors for as little as $100 to $150.

The second thing you notice about printers is likely to shock you in the opposite direction: With replacement ink cartridges costing $20, $30 or more, refilling that cheap printer a few times can cost as much as it did to buy it.

Cartridge prices are an obvious source of frustration and puzzlement for many consumers, who are used to computers getting cheaper and cheaper. Why aren't ink-jet cartridges doing the same?

"It's the razor-and-blades strategy," says David Rocheleau, an analyst at Boston's Lyra Research, a market-research company that focuses on digital printing technology. "Or, if you're selling cell phones, it's the hardware-and-airtime strategy."

The idea is simple: Sell your razors or cell phones cheap, and make big money on their "consumables," such as blade refills or call time. Once hooked, people will see no alternative to premium prices.

It's a time-honored strategy in business, and there is no doubt that the printer industry relies on it. Nor do retailers mind the continuing revenues: One chain gave away a low-end Lexmark printer to any customer willing to buy three cartridges for $30 apiece.

Though printer makers closely guard details of their profit margins, analysts estimate that manufacturers pocket 50 cents or more from every dollar of cartridge sales. "We believe that a majority of their profitability comes from consumables," Rocheleau said.

Rocheleau is not criticizing them. The swift advance of ink-jet printing has been possible, he said, only because manufacturers have been willing to spend enormous amounts for research and development.

To Alison Graves of Hewlett-Packard Co., asking why printer ink-cartridge prices are not dropping is the wrong question.

"We have not per se reduced the costs of cartridges over the years," she acknowledges. "What we have done is to dramatically increase the quality of the print heads, so that customers are getting more value."

She said the company's most popular line of ink-jet printers, the 700 series, can produce about 830 pages of black text from a cartridge with a street price of $29. The per-page ink cost is about 3.5 cents, she said, down from about 8 cents in 1990.

The decline in color's cost has been even more dramatic, Graves said. Based on a color cartridge's street price of $34, the ink for a page with a color pie chart costs 6.6 cents, down from about 44 cents nine years ago. A color cartridge can produce 514 such pages, she said.

"A typical home customer is not going to print 830 pages of black text in a year," Graves said. "There's a perception that people will be going through cartridges right and left. But that's just not true."

Of course, this all begs the question of why cartridge prices remain so high while printer prices are dropping. At HP, Graves said, the cartridge "is where the technology resides. There's significantly more upfront capital investment there than there is in printer development."

Strictly speaking, Graves has a point. HP's high-tech print heads are an integral part of its cartridges. Buy a new ink supply and you are replacing the print head, even though it may be far from worn out.

Still, HP's price structure is roughly mirrored by such competitors as Epson America, whose cartridges do not include replacement print heads.

Replacement cartridges for a $129 Epson Stylus Color 440 list for $25 for black ink and $30 for color.

Greg McCoy, Epson's product manager for printers, said printers and cartridges should be viewed as a package, along with the special papers recommended for the photo-quality prints that Epson has sought to establish as its niche.

"If you look at the cost of a printer, I would say it was a wonderful deal," McCoy said. "For $129, to make the photographic prints that these printers can turn out, I think it's just an amazing deal."

McCoy said privately held Epson does not disclose how printer and cartridge prices are set. Consumers should focus on how printing systems stack up competitively, he said -- not just to one another, but to other means of producing printed pages.

He said that producing an 8-inch by-10-inch print of a photograph costs about $1 on an Epson 440 "way lower than if you go to a photo lab."

Variations in the cost of ink-jet printing are worth watching, according to Consumer Reports. In its March issue, the magazine found sharp differences in per-page costs among 17 printers.

For instance, per-page costs for text (including paper and wear and tear on the printer) ranged from a low of 3.7 cents for the $250 HP DeskJet 712C to a high of 11.2 cents for the $175 Lexmark 3200. The per-page costs for color graphics ranged from 13 cents to 74 cents. For color photos, the range was 90 cents to $2.50.

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