The cut-throat business of printer cartridges

Matt Loney: Printer manufacturers have been quick to catch on to Gillette's business model, but are they going too far?

The problem with cut-throat razors, as any Harvard MBA will tell you, is that they last for ages. Disposable blades make much more sense; sell the handles at cost price and make money on repeat sales of relatively expensive blades from which the worst injury you can expect is a neck that looks as though it has been chaffed by a cheese grater.

Printer manufacturers have been quick to catch on, and who could blame them? Sell cheap printers and hook your customers on the ink cartridges. People have long joked that HP, the mother of all printer makers, is really just a toner or ink company with very fancy toner delivery packaging -- printers.

If you are a printer manufacturer there are some sound business reasons for following the path cut by Gillette, not least of which is that it makes it easier to predict (and improve) revenues several years down the line. And, there is a lot more money to made from selling cartridges than there is to be made from selling printers. Indeed, some estimate the cartridge business accounts for 90 percent of the £19bn annual global printer market.

But what about the consumer? We should be winners too; buy a cheap printer and then, with all the sources of ink cartridges available, shop around for the best buy. After all, ink is hardly expensive. Well, that's the theory. In practice, the picture painted by the printer business is not quite so clear-cut.

Take HP. It is in the US courts defending defending the sale of half-full ink cartridges with its printers. The three Minnesota women who are taking HP to court claim the company doesn't reveal that the 'economy cartridges' installed on new printers are only half full of ink.

It's not so much the practice of selling new printers with half-full cartridges that seems to be aggravating consumers. After all, there is life in the argument that says buyers should realise that an 'economy' ink cartridge has missing something, and reason dictates that this will be ink or cartridge. It's the use of tactics to stop third-party ink makers from selling cheaper cartridges to fit into printers that is raising hackles.

Lexmark was recently vilified in the press for turning to the notorious Digital Millennium Copyright Act, which has been used (not always successfully) by everyone from e-book software vendors to garage door remote control makers to protect their business models. The DMCA, as it has come be known, was intended to stop people circumventing anti-copyright technologies, not to stop people making printer cartridges.

Lexmark is the second largest printer maker, behind Hewlett-Packard. The reason Lexmark felt able to turn to the DMCA was that its cartridges -- in common with many of those from other printer makers -- have a "smart chip" that identifies them as the genuine article. Companies who make smart chips so that after-market cartridge vendors can fool the printer into accepting their products are, it is claimed, violating the DMCA.

In this case, US-based Static Control is in the dock. Static Control's chief executive Ed Schwarze, has written a missive on the practice of embedding smart chips, which you can find here. Schwarze, naturally, is worried about his business; that of supporting the after-market cartridge makers. If that market closes, Schwarze's business will be hit.

Printer manufacturers may have no duty to after-market cartridge makers and their suppliers, but they do have a duty to their customers -- and to the environment. Consumers are hurt by the practice of using smart chips because these chips are designed to stop after-market cartridges, which are invariably cheaper than branded cartridges. This means you end up paying more.

The environment is hurt because the cartridges often cannot simply be refilled. Some cartridges, which combine the colours into one unit, need replacing even when there is ink still in some chambers.

Imagine, for a moment, a world where Ford bought Shell, and suddenly started introducing technology that meant you could only use Ford petrol in your Ford car. How would you feel?

Of course to more accurately mirror the printer market, Ford would have to slash the prices of its cars, which would surely make many people very happy. But as its revenue model changed, so would it also have to hike petrol prices; that might not make people quite so happy. In this hypothetical situation, Ford may also tell you that other petrol -- even if you could get it to work - might damage your engine.

We hear similar tales from printer manufacturers about the adverse effects of inferior inks on a printer, and to a lot of people it is important to know whether they are using the genuine article or an after-market product. But nobody is being accused of passing off cartridges and ink as being made by a major manufacturer; what they are being accused of is daring to compete with a major manufacturer.

Well, a solution to the ink problem may be on the way. The European Parliament recently approved a law that is expected to force printer manufacturers to change their spots. European lawmakers have long been concerned at the amount of electroscrap generated by the PC and electronics industries, and one effect of the new law will be to force a redesign of the cartridges so that they can be reused (one effect of the smart chips is to stop people refilling the cartridges they own with after-market ink). It has been suggested that the smart chips could be forced out of printers altogether, but this is unlikely. However, it will be some time yet (we hope) before printer makers can develop technology that is able to differentiate their ink from after-market ink.

We'd like to hear about your experiences with printer cartridges; if you have any, good or bad, email them to us at the Mailroom with 'Printer cartridge feedback' in the subject line.