Should HP move to offer retailers incentives not to sell their store-brand alternatives to HP cartridges

Eastman Kodak Co. designed a new line of Kodak printers that print high-quality photos featuring replacement ink cartridges that will cost half of what consumers are used to paying. If consumers buy Kodak's economical Photo Value Pack, which combines paper and ink, the cost per print is about 10 cents, compared with 24 cents for Hewlett-Packard's comparable package. If Kodak pulls this off, it could pose a huge challenge to the $50 billion printer industry. Those companies now rely on a razor-and-blades strategy, often discounting machines and making most of their profits on replacement cartridges.

In particular, Kodak's strategy is an assault on the profit engine of industry leader HP. Printing supplied 60 percent of HP's $6.56 billion in operating earnings last year. Even before Kodak's new printer introduction, HP was facing strong competition from cheaper store-brand ink-jet printer cartridges. To fight back, HP has contemplated approaching chain stores that sell store-brand cartridges compatible with its printers and offered them incentives if they end the practice. Because those replacement cartridges typically sell for 10 to 15 percent less than HP's, consumers could be the big losers if a lot of retailers take the printer giant up on its offer. Executives in the ink cartridge remanufacturing industry say that they are discussing whether to complain to regulators about the moves, arguing that it may harm customers - a move that would likely be publicized by the media.