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 user 2006-10-12 at 11:31:00 am Views: 36
  • #16737

    You think your printer is inexpensive? Think about how much you spend on ink or toner each year. We report on why it costs so much to print, and what’s being done about it.
    If you’re like me, you feel the same raw, burning, sinking sensation every time your inkjet printer notifies you that it is out of ink. Didn’t I just change the ink cartridge last month? Probably. But households and small businesses can print hundreds of pages and photographs a month — and enterprises can go into the thousands. That’s a lot of ink. Which translates into a lot of dollars.No matter how you cut it, ink is expensive. Consider a personal example: Last year, I spent approximately $160 on inkjet replacement cartridges for my Epson CX6600. The printer itself only cost $200, making it hard to not feel ripped off on a yearly basis.The typical inkjet printer owner spends about $80 per year, although that experience varies greatly, says Jim Forrest, a senior analyst at Lyra research and a 35-year veteran of the printing and digital imaging field. “It’s difficult to create an overall average across all printer brands, because of the different designs and cartridge types printers use,” he explains. He adds that “the average inkjet printer owner uses about four cartridges per year, and the average price of a [first-party manufactured] cartridge is about $20.”Eighty dollars a year multiplied by hundreds of millions of inkjet printers is a whole lot of money. Is it any wonder that a number of tech-savvy consumers have embraced ink replacement techniques such as third-party cartridges and syringe refills in the pursuit of reduced costs (despite the possibility of damaging either their print heads or their clothing)?

    Rubbing Ink Into The Wound
    For the Epsons and Hewlett-Packards of the world, the so-called aftermarket of replacement ink (and paper and other supplies) represents a shiny, happy profit center. Total inkjet cartridge shipments will reach 1.5 billion units worldwide in 2006, including 514 million in North America, according to Lyra Research. At an average of $20 a pop, that’s a whopping 32 billion-dollar market.Until recently, manufacturers like HP, Canon, and Epson have held an iron-fisted monopoly on ink replacement, leaving consumers with little choice but to pay premium prices for the privilege of printing.According to Mike Duffett, director of CIG printer marketing for Canon USA, the high prices are justified by the costs of research and development. “We spend a significant portion of our overall dollars — over 10% of our revenue — on R&D,” he explains. “It is very important to us that we give consumers the best possible photos under a variety of conditions for a very long time.”

    Looking For Alternatives
    But where there’s a profit, there’s somebody to try to grab a piece of it. In years past, a minority of consumers dead set on avoiding outrageous prices resorted to desperate measures, including purchasing third-party cartridges from online vendors. Another resource was the purchase and use of hypodermic-style needles to draw and inject ink into empty first-party cartridges.Many of these alternatives were so technically difficult, inefficient, or defective that, with some notable exceptions, they remained under the radar of printer manufacturers. However, the last five years have seen the emergence of more mainstream third-party ink resellers such as Cartridge World and Rhinotek. By offering generic ink replacement at prices that cost as little as 30% of brand-name supplies, these third-party ink resellers have generated mass appeal with consumers who are sick of paying exorbitant prices for ink. Recognizing this, even major retailers like Staples and even Walgreens have begun to offer third-party ink as a more affordable replacement option.Cartridge World is the best example of how third-party resellers have profited handsomely off the growing demand for lower-priced ink. Launched in 1999 in Australia, Cartridge World offers ink cartridge refills at significant discounts over first-party printer manufacturers. Over the past five years, the brand has blossomed to the point where it accounts for over 50% of the entire ink refill market. In 2004, the franchise was so strong in North America that it opened an average of one franchise a day for the entire year.This slice of the inkjet pie has experienced stellar growth over the last five years. According to Lyra Research, third-party ink will account for 31% of worldwide ink sales in 2006, with the North American market accounting for 8% to 10% of worldwide third-party sales.By way of comparison, estimated growth of the entire market of third-party and first-party sales is pegged at about 7% a year for the next three years. The third-party market, however, is expected to grow at double this rate over the same time period. Hello, Lawsuit.Not surprisingly, printer manufacturers have aggressively protected their perceived right to be the exclusive purveyors of ink refills. A quick Google search on printer ink lawsuits will turn up hundreds of results. So how in the world have these resellers been able to even get into the market at all?The most common method has been to avoid reverse engineering ink cartridges in favor of simply refilling original ink cartridges with generic ink and reselling or trading the refilled cartridges. But although the Cartridge Worlds and Rhinoteks have been able to gain a critical toe-hold in the market, numerous lawsuits have been filed by the major printer manufacturers in repeated attempts to protect copyrights. .    

    Price Comparison
    In the last 12 months alone, Epson has sued ink manufacturer Madea for patent infringement and, in a separate lawsuit, has gone after 27 companies—mostly Chinese manufacturers plus distributors. In October 2005, HP filed a public complaint stating that Cartridge World’s ink utilizes a proprietary, HP-patented chemical formula found in its Vivera inks. HP also asserted in June, 2006, that generic inks sold by Walgreens and Office Max infringed upon proprietary patents.It’s relatively easy for companies like Canon to identify patent infringements at the chemical and mechanical level, says Forrest. “There are some pretty complicated proprietary chemicals that the first-party manufacturers have developed,” he explains, “such as formulas that prevent inter-color bleed and chemicals that allow the ink to quickly dry so it doesn’t smear. It’s fairly easy for manufacturers like Canon and Epson to get the ink into their labs and test it to make sure there’s no patent infringement.”The law is clear: So long as no patent infringement exists, third-party resellers are free to manufacture and move as much ink as they want. However, considering that the Canons, Epsons, and HPs of the world each have thousands of patents around formulas, cartridge designs, and print heads, this is easier said than done.But based on the popularity and success of other generic markets — such as pharmaceuticals — there should be no doubt that inexpensive ink is here to stay. As long as third-party ink manufacturers don’t infringe upon the printer manufacturers’ proprietary patents, they are free from legal concern.Great For The ConsumerWhen questioned, both Canon and Xerox go out of their way to express respect for the third-party resellers. “As long as our patents aren’t being infringed upon,” states Duffett, “it’s great for the consumer.”John Laing, Xerox’ senior vice president for the company’s Supplies Delivery Unit, echoes this sentiment. “Xerox takes no issue with third parties that are able to manufacture quality ink and toner that work seamlessly with our product line and don’t infringe on our intellectual property,” he says. That’s not surprising. In an ironic twist, Xerox itself participates in third-party sales, developing toner cartridges for HP devices as part of its “It’s Compatible” line.It’s also interesting to note that first-party manufacturers seem to be simply warning off companies when they perceive patent infringements rather than going straight to litigation. One explanation is that chain retailers like Staples are beginning to sell third-party ink alongside authentic products and printers. Printer companies seem more reluctant to take full-scale legal action if it could potentially affect their retail partners.But that doesn’t mean that they won’t head for the courtroom if necessary. And since third-party resellers such as Cartridge World and Staples often don’t manufacturer their own ink — instead they buy it from other manufacturers — there is now such a pervasive paranoia of lawsuits and litigation that, according to Forrest, “All of the ink manufacturers tell me that their customers are asking to be indemnified [against legal action].” Quality Concerns There’s another reason to oppose aftermarket ink, says John Laing, Xerox Supplies Delivery Unit vice president. “Third-party ink and toner may not stack up to the original vendor-developed products in terms of quality. Inferior supplies can result in copy and print quality issues, downtime, service issues and general poor printer or MFP performance,” he says.That’s a valid concern in some cases, but third-party inks and cartridges are adequate for most printing application, explains Forrest. “When I get asked about the quality levels of third-party inks, I tell people that 95% of what I print ends up in the waste basket anyway.”
    But it’s a different story for photographs. “They’re typically fine, but a lot of times they won’t last as long,” he admits. “I have a window that faces the sun. Every now I’ll print something with third-party ink and place it in the sun. Some of this aftermarket stuff is faded in two days.”Interestingly, when you begin to compare ink costs with regards to “real” photo processing, cost turns out to be a wash. Processed photos range from 30 to 70 cents per print, while inkjet photographs tend to range from 25 to 50 cents using first-party ink.

    What Does It All Mean For Me?
    Regardless of whether consumers choose to use authentic ink or aftermarket supplies, the pressure third-party ink suppliers such as Cartridge World are creating will quite likely result in increased values not just for generics, but for authentic inks as well.”Genuine Canon inks and papers offer quality and value,” Duffet explains. “The value part of the equation is very important to us.” To stay competitive, the company is putting together new packages aimed at specific retail customers, such as student combo packs that emphasize black inks and paper.Other companies have become more creative. HP recently announced a strategy for compete with aftermarket ink vendors aimed specifically at developing nations, a market where non-OEM ink is booming. The core of this strategy entails a brand new “value” line of ink HP calls Simple Black. While analysts have deemed it unlikely that HP will pursue this strategy in North America, tremendous success — or increased third-party market share — in developed nations may lead to a change of heart.A workable common-sense approach would include buying both first-party and third-party ink, Forrest says. “If you need perfect print quality, buy the OEM first-party ink,” he explains. “And if you don’t and want to save some money with third-party, make sure you buy it from Staples or a big brand. They’ll guarantee the ink, which makes it a lot safer purchase.”That is, assuming that a printer manufacturer doesn’t sue them first.