Can Kodak pull it off?
Ever since Kodak announced on February 6th its entrance into the consumer photo inkjet arena, market analysts have been debating if Kodak can compete in this already mature market, especially against the printer giant Hewlett-Packard.
With its very profitable film sales market rapidly dwindling, Kodak quickly needs another cash cow. Kodak’s CEO, Antonio Perez, came to Kodak three and a half years ago from HP’s very profitable inkjet-printer business, with a plan to revitalize the company through a dramatic change in the consumer inkjet industry. Perez’s plan was to produce an inkjet printer and ink as good or better than the competition, but to attack the thing that has aggravated consumers the most—the high cost of inks.
Ink manufacturer profits often reaching over 75%, tempting companies to sell their printers at or below cost, just to get the ink cartridge sales (the old razor and razor blade principle). Kodak’s plan is to sell ink cartridges at prices that are one-half of their competition, and still be highly profitable because consumers will be induced to print more photos at the cheaper prices, and then buy more of their ink. See related story ("Kodak plans to break the ink cartel with cheaper ink").
High-ranking executives from both HP and Epson have scoffed at Kodak’s plans to compete in their markets. Market analysts predict that it will be difficult for Kodak to get shelf space at many of the big-box stores because HP offers so many incentives to dealers to keep their products in front of buyers, and exclude competitors. With so much on the line, industry experts expect HP to pull out all the stops.
After reading Business Week’s six page article ("Kodak’s Moment of Truth") in their February 19th issue, I believe Kodak and Perez’s team can pull this off. Analysts who have seen Kodak’s printers have come away impressed. Although this is a roll of the dice on a risky new strategy to reinvent the inkjet printer, all the right pieces are in place.
Susan Tousi, Kodak’s head of R&D (and affectionately dubbed by her colleagues as the “Queen of Geeks") kept sending the engineering staff back to the drawing board to get it right, after having been told by Perez, “We have only one chance to do this right. If our first introduction fails, we fail.”
Unlike HP, Kodak’s EasyShare printers follow Epson and Canon’s philosophy of placing the print heads in the printer and not on the ink cartridges. This allows the manufacturer to producer much cheaper inkjet cartridges, because their main purpose is just to act as a reservoir to hold ink. To really cut costs, Kodak could have gone with the cheaper and less problematic dye ink technology. But dye inks fade fast, often in less than 15 years, and dye made prints are very susceptible to smudging and water damage. Kodak’s R&D team spent almost three years developing a new pigment ink technology that produces water-resistant and fade-resistant prints that will last 100 years or more.
Kodak’s inkjet printers have 3,840 nozzles that fire at a rate of 24,000 drops per second. The pigment inks dry in just 15 milliseconds on Kodak’s microporous papers, and the printers can produce a 4x6 print in 28 seconds.
The Kodak EasyShare All-in-One printers (starting at $149.99) are focused on the consumer market, with black ink replacement cartridges costing $9.99 and color $14.99 (all 5 colors). If consumers buy Kodak’s economical Photo Value Pack, which combines paper and ink, the cost per print is about 10 cents, vs. 24 cents for HP’s comparable package and 29 cents for Epson’s.
To kick-start distribution, Kodak has made a deal with Best Buy Company to be the exclusive retailer of these products for the first three months, beginning in March, when the printers are introduced.
Posted by Royce Bair on 02/14 at 08:00 AM
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