Razor and Blades: The Business Model Behind the $39 Printer Trap

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A printer that costs 39 dollars is not a bargain. It is the first payment on years of ink. This episode examines the razor and blades business model, in which a company sells a base product cheaply, sometimes at a loss, because it is useless without a consumable only that company supplies. The story starts by correcting a legend. King Camp Gillette did not give away his razor handles. He sold them at a premium until his patents expired in 1921, and only a flood of clone razors forced the price down.

The truer pioneers worked on a grander scale. Standard Oil handed out eight million kerosene lamps across China to create demand for its fuel, and Eastman Kodak made cameras cheap so it could sell film, paper, and chemicals. When physical consumables became easy to copy or unnecessary, companies began to manufacture dependency with chips, licenses, and lawsuits. The same logic now runs from ink cartridges and game consoles to subsidized smartphones and nuclear reactors tied to 40 to 60 years of proprietary fuel.

• In Lexmark International v. Static Control Components, a US appeals court ruled that bypassing an ink cartridge chip did not violate the Digital Millennium Copyright Act.
• After former Atari programmers founded Activision and sold games for the 2600, Atari added lockout chips to its later 5200 and 7800 consoles.
• Fujifilm undercut Kodak with cheaper compatible film, and today its Instax cameras still sell physical prints at roughly 2 dollars a shot.
• Dot-com era giveaways backfired when people kept the free PCs without the service, and hobbyists reprogrammed the free CueCat scanner to catalog their own books and movies.
• The model shades into antitrust territory with tying, as when a supplier makes a bookstore take unpopular titles to get a blockbuster, or a cable bundle forces a dozen weak channels alongside one hit network.