#1323 1959 · Haloid Xerox (Xerox Corporation) · Office equipment / copiers
Xerox gave up on selling a $29,500 copier and started charging four cents a copy instead
the problem
The 914 copier worked, but its $29,500 price tag made it unsellable to the offices that needed it most
background
The Xerox 914, unveiled in 1959, was the first plain-paper office copier and a genuine breakthrough — but pricing it to sell meant recovering its full manufacturing cost per unit, which put the sticker at roughly $29,500, an impossible line item for the office-supplies budget of the small and mid-size businesses that were the machine's natural market. Rival copying methods (mimeograph, carbon paper, wet-process photocopying) were cheap per page even though they were slow and messy, so a $29,500 capital purchase looked absurd next to them regardless of how much better the 914 actually was.
Haloid-Xerox needed offices to experience how much they'd use a fast plain-paper copier once they had one, but no purchasing manager was going to approve that experiment at a price five figures long.
what everyone would do
Cut the manufacturing cost, discount the sticker price, or sell only to the large corporations that could afford $29,500 outright — the standard playbook for an expensive capital good competing against cheap incumbents.
what they saw
A customer who will never pay $29,500 upfront will happily pay four cents a copy — that number reads as a small, reversible cost, not a bet on the future the way a purchase does.
the move
Xerox leased the 914 for $95 a month, which included 2,000 free copies, and billed four cents for every copy beyond that, tracked on a meter built into every machine and read by the same service technicians who kept it running. The company effectively gave up trying to capture the machine's value at the point of sale and instead captured it copy by copy, for as long as the office kept using the machine.
why it works
The meter converts an unpredictable, high-stakes capital decision into a small, reversible operating expense, which offices approve far more easily and use far more freely once approved — and because Xerox's revenue rose with actual usage rather than being capped at a one-time sale price, the company captured more of the value a heavily-used machine created than a sale ever could have. The free 2,000-copy floor also let hesitant offices discover how much they needed the machine before the meter ever cost them anything.
the payoff
Xerox's revenue grew from $32 million in 1959 to over $1 billion by 1970, driven almost entirely by the per-copy meter.
where it breaks
The model needs the seller to be able to meter usage cheaply and reliably, and it needs a large gap between what customers will pay per use and what they'll pay upfront — a gap that closes once competitors offer the same machine to buy outright at a price low enough to beat the lease's long-run cost, which is exactly what happened to Xerox once Japanese copier makers undercut it in the 1970s and 1980s.
what came after
The metered lease became the template for the entire copier and later managed-print-services industry, and 'the Xerox model' is now the standard shorthand for pricing hardware by the customer's usage rather than by the hardware's cost.
references
- [1]Xerox 914 Plain Paper CopierSmithsonian National Museum of American History, 2020americanhistory.si.edu
- [2]Xerox Corporation: The Copier Company That Turned a 1959 Leasing Strategy Into a Remanufacturing SystemThe Supply Loop, 2023thesupplyloop.com