The click-charge has come a long way since its earliest days in the office copier market. Now it's king of digital production printing. Andy McCourt reckons it's time to give the click the flick and move to a more mature charging model for what has become a major print production sector.
When the wonders of digital production printing arrived in the printing industry in the 1990 it came complete with a business model directly from ‘photocopier central casting’ – the charge-per-click impression model. But as digital printing becomes mainstream, it is time to abandon this taxation-like system and consider non-click models that allow printers to take back control of the pages.
The best business model to accumulate large sums of money is the taxation system. With GST, for example, the more we buy and use, the more we pay to the state and federal coffers. In return, we receive benefits back: schools, roads, health services, a defence force and of course the machinery of government itself; those lovely Canberra and Wellington pollies and public servants that we cherish so dearly.
The attraction of the taxation system did not escape the pioneers of photocopying. Making copy machines, selling them and supplying toner and developer would deliver only a manufacturer’s profit margins. But what if they could gain a small amount of revenue from every page that was copied? In return, the copier suppliers would provide maintenance service, parts and toner – maybe even paper at a push. All they needed to do was get the maths right.
A case of doing too well
The pioneer copier company – Xerox – did get the maths right and how. So successful were the Xerox copiers of the 1960s and 70s, particularly the iconic 914, that the US Federal Trade Commission took anti-trust action against the company, since it held almost 100 per cent of the market. Xerox was forced to license its entire patent portfolio so other firms could make copiers - and also charge click rates. The torrents of cash flooding into Xerox resulted in the establishment of the famed PARC research centre, where the PC, GUI, mouse, laser printer and PDL were developed, but never commercialised by Xerox as young tyros like Steve Jobs and Bill Gates seized on the computer revolution.
So, the copier world became addicted to clicks - and why not? It was, literally, a license to print money – for the suppliers. When Canon introduced the CLC 1 in 1987, the licence extended to CMYK colour – with some villains taking ‘printing money’ too literally and forging banknotes on them. They were always caught, unaware of certain security features woven into the images, that enabled tracking back to source (warning: they are still there today).
Click charges made fortunes for copier suppliers and paid for the BMWs beloved of highly-commissioned copier salespeople in the 80s. But then someone wrote a RIP that turned colour copiers into printers; page-per-minute speed accelerated and in 1993 Indigo and Xeikon set the copier world on a collision course with traditional printing with the introduction of the first true digital colour presses.
As digital page volumes increase, the stampede to ‘control’ page output and secure click charges accelerates. Theoretically, the number of MIF (machines in the field) should bear a direct co-relation to the monthly click volumes charged, but faster digital presses have made this assumption suspect. The game now appears to be identifying the high volume printers who can guarantee a fixed number of impressions/clicks per month or year. We are talking several millions here.
No 'clicks' with offset
The notion of an offset press manufacturer charging a ‘click’ on every impression made on one of their machines is horrifying to any self-respecting printer. However, back-door ‘click-model’ offset press sales have been made here in Australia and New Zealand – with disastrous results.
Where a press supplier offers a TCO (total cost of operation) deal to a printer that includes finance, plates, prepress, blankets, ink, service maintenance and buy-back/trade-in prices based on annual metered usage after 3, 4, 5 and up to 7 years; this is a click charge by another name. It was a method favoured by Geon and the ‘old’ Blue Star Group, and we all know where that ended up.
Being given a heatset web press on a payment holiday did Diamond Press no favours in 2000 – they won most of the Olympic printing contracts but went under owing millions in April 2001. There were others. Events such as these should make one think about the long-established and proven way to start or expand a business: begin with a great idea and business plan, investment, working capital, proficiency and hard work. If you make it too easy for anyone to enter a business sector with little or no capital commitment, no concept of real costs and suicidal pricing, there is only one likely outcome.
The click-only trap
A recent development in click marketing is for high volume digital presses installed on a ‘click-only’ basis. With no capital outlay and the press remaining the property of a supplier, the printer is in effect a ‘facility manager’ on behalf of the supplier, who reaps a fixed per-page ‘click tax’ based on a guaranteed minimum number of impressions.
A printer under such an arrangement becomes little more than a labour-and site-provider for the supplier, who benefits from ‘gifted’ clicks that can be serviced directly should things go wrong because most digital suppliers have print management divisions. The ‘free machine, pay click’ model also disadvantages other printers who have financed their equipment, perhaps securing it against personal assets.
Perhaps, now that digital presses are faster, more robust and utilised on more than one shift, it is time to sell them on an equipment + service + consumables + parts basis and leave the cost calculations up to the printer, just like the offset world. Operating leases can still be used to make monthly payments on a rental basis and keep Capex off of balance sheets, should that be desirable.
As click-charges go down, it becomes more attractive for suppliers to pitch for major volume accounts through their print and facilities management divisions. This presents an ethical, as well as commercial, dilemma to the industry – just when is it acceptable for your machinery supplier to also compete against you as a print service supplier?
One complaint on the supply-side is that ink or toner coverage in practice, exceeds that which is the norm when click rates are set. In mono transactional statement days, a high-volume digital press could be assured of no more than 15 or 20 percent coverage. Enter CMYK++ and solid colour backgrounds and it can rocket up to over 100, 200 or 300 percent – no problem if you are on a fixed click-rate regardless of coverage but take a look at the fine print of your contract and you may find ‘excess toner use’ clauses in there!
Maybe we should ‘flick the click’ altogether for production printing, keeping it only for light volume and office-type printing which is where it all began with copiers. Efficient suppliers should still be able to make their profit goals by pricing service contracts, parts and consumables appropriately. The fear of inferior third-party inks and toners finding their way into big brand equipment is easily addressed in the warranty and service contract terms.
However, to do this, digital printers need to know their true costs and very few do. In the next ReVerb, I hope to have ready a downloadable spreadsheet that should help anyone considering a new digital press to calculate their true cost-per-impression and make informed decisions on whether a click or no-click model is better for their business.
Digital printing is generally a more profitable business than offset but it’s just a question of who gets the lion’s share of the profits.