Everyone who knows me well also knows that I love the Boston Celtics. Of course, I have other interests, but the Celts have been a constant part of my life as long as I can remember. I’ve dressed up as Larry Bird for Halloween, I may be the only 30 year old with Celtics slippers, Tommy Heinsohn is featured in my Google Talk profile pic, and the last 7 minutes of the 2010 Finals pretty much ruined last summer for me. So it’s safe to say that I have been keeping my eye on the NBA’s increasingly shaky financial situation and the possible ramifications that a labor dispute would have on the Cs’ chances of hanging banner number 19, assuming/hoping we put banner 18 in the books this June.
With that in mind, I took particular interest in The SportsGuy Bill Simmons’ recent podcast interview with NBA Commissioner, David Stern. The interview did not exactly put my lockout fears to rest, but it certainly provided a clear explanation for how the NBA got in the mess it is in today and raised some interesting parallels with what I’m seeing with one of my other great “loves”, office printing.
The most relevant part of the interview went like this:
SportsGuy: “In the players’ defense, it’s hard for them to realize how bad of a financial situation the owners are in when they saw such crazy deals taking place last summer. I would have thought that if there ever would have been a summer of fiscal responsibility (in the NBA) it would have last summer”.
Commish: “Why should last summer have been different than any other summer?”
SportsGuy: “Why? Because you just spent the last year telling us that the dollars were just not working anymore”.
The SportsGuy and the Commish’s back-and-forth continued for several minutes, bringing to mind the Senate hearing scenes from Godfather II….Yes, SportsGuy as Senator Pat Geary and Stern switching between the Frankie Pantangeli and Tom Hagan roles. Until Stern exposed the NBA’s tragic financial flaw in the following cautious, but very revealing admission:
Commish: “I spent the last year telling you that, overall the league was losing money, but the pressures on individual teams to go out and compete and try to win remains the same…Nevertheless when you add it all up, it doesn’t make for a sustainable business model”.
And that’s it… Much of the NBA has chosen on-court competitiveness over back-office profitability. It would be convenient for proving my point if only the poor performing teams, poorly-run teams, or the teams in regionally-depressed cities were in the red, but money-losing teams are scattered across the NBA spectrum. In fact, you may be wearing the slippers of a money-losing NBA team right now, but I’m not (Celts are +$4.2 million).
People from the inside of the office printing industry can hopefully understand what I am trying to communicate through this fun-for-me, but possibly clumsy analogy. Because of the incredible level of competition that dominates the office printing industry, its players do not treat each other very well. They compete with their own clients, slash prices in the name of market share, and encourage their sales people to replace perfectly good MFPs mid-life just to install the latest and greatest, but still very similar models. And then, after all that, the aftermarket guys come in and sell end-users and authorized dealers knock-off consumables. Heck, even MPS, which is undoubtedly the hottest thing to hit the office printing industry in the last half-decade, was at least partially made possible by years of dealers and vendors over-selling their own clients and will have the eventual impact of reducing both hardware sales and page volumes.
So that brings me to color CPCs. Since my first days covering the office printing industry it has been clear that color is king, particularly color pages and the hefty click charges (CPCs) that come with them. Vendors have tried every trick in the book to convert as much of their own install base and their competitor’s fleets to color devices in an effort to capture these high price and high-margin CPCs. But now with every trick already tried or in-play, vendors and dealers have finally begun sacrificing the very click charges they value most in an effort to remain competitive. It doesn’t take David Stern to tell you that this is not sustainable and is not in the best interest of the industry. However, the Commish would certainly understand the pressures that these vendors feel to “go out and compete and try to win”, and that is just what they are doing.
In the last two years I have seen the average office-class A3 MFP’s color CPC fall by over 10 percent to $0.0658 in government contracts, as vendors and dealers slashed the price of color prints in order to make money off of the same exact color prints they just reduced. And based on the changes made to the color consumables used in many of the MFPs that launched in the last four months, it certainly seems like this trend is only going to intensify. As Rick Pitino might say, “10 cent CPCs are not walking through that door.”
Fortunately the office printing industry is far more profitable than the NBA, but in order to stay that way, vendors should make sure that they are on the right side of the line between remaining competitive and driving price erosion. And if you want to know where that line is, Gap Intelligence’s MFP-Copier Report features over 17,000 active MFP contracts (34k historical) with street-level hardware, option, CPC, and consumable prices (current and trended) – not to mention we offer the industry’s best TCO tools. We may just help you raise another banner too.
