Kodak may still be a world leader in film processing, but it's the new kid on the block in the area of general-purpose ink-jet printers. Its new EasyShare All-in-One 5000 series printers, out just a few months, face stiff competition from entrenched competitors such as Hewlett-Packard, Epson and Canon.
In a gambit to differentiate itself and gain mind share, Kodak is trying to tap into alleged consumer dissatisfaction with high ink prices by selling its printers for a bit more than the competition but its cartridges for less than half the price. The company claims that its EasyShare printers have a lower total cost of ownership than competitors' models and that users will save substantially on consumables over the life of the printer. HP begs to differ, of course: "At essentially the same prices as Kodak, HP offers six-color printing for outstanding photo quality," an HP spokesman said.
Kodak's brash strategy flies in the face of the conventional wisdom in this market, which follows the classic Gillette model: "Give away" the printer at a very low margin, but rake in hefty profits on consumables. That approach has paid off handsomely for HP. The 16.3% margin earned this year by its $1.2 billion imaging and printing business, announced by Chairman and CEO Mark Hurd during the company's May 16 earnings call, makes that unit HP's most profitable by far, with three times the margin of its personal systems business. Epson, Lexmark and other brands follow this same model.
But Kodak argues that it's not fair to customers. "Consumers have been ripped off by other printer manufacturers on the cost of ink, and they're very frustrated with that," says Magnus Felke, director of product marketing in Kodak's ink-jet systems group. That frustration may lead them to seek alternatives.
Investors are also wary of that possibility. In its latest appraisal of HP, bond rating firm Fitch Ratings added a caveat to the stellar A+ it gave the company, alerting investors to "the potential long-term threat to HP's highly profitable printer supplies business from providers of remanufactured cartridges and/or new printer business models from competitors that offer discounted ink cartridges."
HP has taken some defensive measures against the threat, most notably striking a bargain with retailer Staples earlier this year to drive out inexpensive generic versions of HP ink and toner cartridges. Just as HP was closing that leak in the profits dam, however, Kodak made its announcement.
Kodak's talking tough, but can it really overturn the ink cart? To find out whether the company's claims about ink costs are valid, I compared Kodak's midrange EasyShare 5300 All-In-One with HP's Photosmart C5180 All-in-One, a popular printer whose price and features match up well with the EasyShare.
Specs and Stats
Kodak offers three models in the 5000 line, all of which use the same basic print engine. The basic model 5100 sells for $149. The model I tested adds a 3-in. color LCD and the ability to review and print pictures directly from a memory card; it costs $199.99. The $299.99 model 5500 adds a fax function, an automated document feeder and a duplexer for two-sided printing. (The duplexer is also available as a $79.99 option for the other two models, and all three can use a $49.99 Bluetooth adapter for wireless printing.)
The Photosmart C5180, one of the most popular of the six entries in HP's Photosmart series printer line, is functionally similar to the 5300, though it does include built-in network support and a few extra buttons on the front. While the Kodak 5300 has a single Copy button, for example, the C5180 offers separate buttons for black-and-white or color copies.
Pigment vs. Dye-Based Inks
A key differentiator between the HP and Kodak models lies in the ink technology each offers. Kodak's printers use pigment-based inks, while the HP model I tested uses dye-based ink. Pigment-based inks suspend colorant particles in the ink, while with dye-based inks, the colorant is dissolved in the liquid.
Dye-based inks have traditionally offered brighter colors, but prints have faded faster. Pigment-based inks have generally produced less vibrant colors, but they've offered greater longevity. Now both vendors claim to have solved those problems: HP says its dye-based prints will last for decades, and Kodak claims that its 5300 series inks offer color quality comparable to dye-based processes. "When you grind pigment ink into very small nanoparticles and make them homogenous, you can create colors that are just as vibrant," says Kodak's Felke.
HP claims that photos that are printed on its Advanced paper, protected by glass or a protective sheet in an album, and properly stored will last 40 years, and those printed on its Premium paper will last 80 years -- although all photos gradually break down as they're exposed to light, humidity, ozone and other pollutants. Kodak says its prints have been optimized to last a lifetime even when using less expensive "porous" photo papers. For more on the difference between papers, see "The Paper Choice."