Is There More Than Just Selling Black And White?5 Feb, 2001 By: Bob Sostilio imageSource
Is There More Than Just Selling Black And White?
Industry researchers have been the voices in the wilderness since the late 1980’s and early 1990 proclaiming that ‘this is the year of color”. Prior to that the early pioneers like 3M (Color-in-Color in 1969), Xerox (6500 in 1974), Canon (NP Color in 1979 and Color T in 1984), Sharp (CX5000 in 1986), and other would have had more success but for the lack of color originals to reproduce. Today, more color documents are finding their way into the business document workflow due primarily to the influx of color documents created and distributed from production environments and print-for-pay locations. But the lower acquisition cost of color laser printers, the acceptance of images from faster speed inkjet printers and standards for color faxing are providing opportunities outside the production environments. Small office and corporate workgroup environments all of a sudden are handling documents containing color and are now looking for ways to reproduce them at reasonable price points. Therefore, every sales call today and in 2001, has the potential to include a color copier / printer MFP (Multifunctional Peripheral). Just how real is this color opportunity and where is it going?
CAP Ventures tracks the black and white and color markets both standalone and connected and publishes its yearly finding and forward looking projections. Recently Barry Tepper, CAP Ventures’ Senior Consultant for MFPs and Virginia Higgins CAP Ventures’ Image Communications Analyst issued their findings, which are part of this article.
Color Versus Black And White MFPs
Printers are by far the largest category of office (and home office) products, and color is growing rapidly as a percentage of single function printer sales.
The monochrome growth is due to strong performances in all three categories (printer-, fax-, copier-based), but especially in thermal transfer-based fax, which has become the entry-level price leader for MFPs, and workgroup copier-based machines. Altogether, black and white MFPs grew by 643,000 units or 46% in 1999, while color units grew by 332,000 units, or 25% in the same time-period. Color is now a given in all MFP categories.
The growth of color was slower for copier-based and fax-based MFPs in 1999. Color copier-based units were still too expensive (on both initial purchase and on a cost per copy basis), which limited their market penetration primarily to production or print-for-pay locations. While machine prices and cost per copy are dropping, the latter is still a consideration that limits widespread distribution of these units in the corporate world. CAP Ventures expects machine price and cost per color page to drop significantly in 2001 through 2004. However, cost per color page is only part of the consideration of color copier based machines in the general corporate world.
In copy shops, service bureaus, and other print-for-pay locations, color output is a profit generator, so the price of hardware and cost per color page can–within reason–be passed on to customers as profit. In many CRDs and captive graphic shops, while not a profit center, color output is mission critical. Again, relatively high costs can usually be justified. However, for general office applications, output devices are cost centers. Color MFPs are still expensive not only in terms of cost per color page, but also cost per black and white page. Most color MFP machines print a “black” page at a 50% to 200% price premium, when compared to that same page printed on a monochrome machine. (Different vendors use different methods of calculating cost per page in order to look best competitively.) Since 80% or more of general office output is black and white, it is necessary to find the least expensive way to produce that output, and most of today’s color devices do not qualify.
Therefore, if an organization wants color output, it must acquire both a black and white machine for the majority of its work, and a special machine for the color work. CAP ventures believes that there will be a large upswing in sales of color machines when printing a “black” page on the color machine costs the same as printing that same page on a black and white machine. At that point, the cost (and space) objection of needing two machines disappears, because the user needs only one machine to print color or black. Since printing color will always be more expensive than printing black, vendors will provide drivers for these machines that will allow the network manager to assign permissions for access to the color feature.
Black and white outgrew color in the overall MFP market. However, in the Personal environment, color MFP unit placements are strong, based on the printer and fax prime functions, and virtually all color units use inkjet technology. There was also a strong growth in 1999 of mono MFPs, based on both Electrophotographic and thermal transfer technologies. Although there are some color inkjet fax machines in the Workgroup environment, color printer-based and copier-based MFPs in Workgroup are toner-based machines, and as such, are still expensive. Therefore, growth for those color units was moderate. At the same time, Workgroup B/W sales, both fax- and copier-based, soar.
In the Production environment, no new B/W machines had been introduced for several years, and even the Xerox DocuTech 135, which had been selling well since 1990, finally reached the end of its sales cycle. Xerox is filling that end of its line with single function printers. Toward the end of 1999, Canon, Gestetner, Konica, Ricoh, Savin, and Xerox announced Segment 5 and 6 digital copier/printers, which will start selling in significant numbers in 2000.
New color copier-based MFPs for Production, however, continue to be launched by Canon, Sharp, Toshiba, and Xerox, and sales there are growing well. There were fewer than 1,000 B/W Production units placed in 1999, and just over 4,000 color units.
About ten years ago, Canon and Sharp each produced fearfully expensive proprietary color fax machines, which were sold into a few vertical markets. In 1997, Brother introduced its own proprietary color fax system on its inkjet MFPs. Compared to the Canon and Sharp units, Brother’s were extremely reasonably priced, but again, users had to have matching systems on both ends of the fax connection.
Just over two years ago, the International Telecommunications Union (ITU), the body that sets communications standards, approved T.30e, a color fax standard. Fax vendors ignored the new standard, but in August of 1998, HP introduced the first compliant color fax product in a printer-based MFP. In October of 1999, CCSI also introduced a color fax compliant printer-based MFP. In December of 1999, Brother became the first with a T.30e compliant fax-based model.
During 2000, T.30e is rapidly becoming a popular item, not only on MFPs that print in color, but even on the new kind of machine that prints black but has a color scanner. The reasons that T.30e is moving toward “checklist” status is that it provides another easily understood feature, it costs virtually nothing to implement (once there is a color scanner,) and there are some valid applications and even a few identified vertical markets. CAP Ventures believes that T.30e will become a checklist item on all fax capable MFPs that have a color scanner, and will do so before the end of 2001.
Color in General
The trend for more color output continues, as we have reported before. Color is expected to enter a strong growth period in Workgroup environments as the cost of toner-based machines and RIPs (as well as cost per page) decline, and as the speed and paper handling of inkjet machines improves.
On the toner side, we expect both single-drum and four-drum models to become affordable for hallway locations. Despite the reduction in hardware prices, price related issues remain for Workgroup color:
· The cost per color page will limit user’s access to color printing on a corporate wide basis.
· The cost per black page on the color machine is too high to allow “the color machine” to become “the only machine”. CAP Ventures believes this is the key to dramatic growth of color in the corporate arena.
As an aside, Xerox introduced a creative click price structure on its Document Centre Color Series 50 to address just this issue, and it is an important aspect differentiating the Series 50 from Xerox' almost identical DocuColor 12, which targets the graphic arts and print for pay areas. We believe other vendors will follow this trend to set the pricing of black and white output on color machines to be equal to black and white machines.
So as the price of acquisition declines and there is no penalty to make a black and white document on a color machine, color MFPs may they be copier-based, fax-based, or printer-based, will continue to grow at 40% compounded annually and offer tremendous after market opportunities in the convergence markets.