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As you may have heard, Keurig is engaged in a battle with a host of companies that aspire to provide consumers with ‘pirate’ coffee pods. And who is losing this battle? The consumer.
For those of you who aren’t familiar with it, Keurig’s business model is pretty much the same as the business model used by most producers of desktop printers. Desktop printers have become almost trivially cheap — you can buy a laser printer for under a hundred bucks now — but the cartridges cost a bundle. That’s where they make their money. Likewise, Keurig sells its popular single-cup coffee makers at astonishingly reasonable prices, and makes its money on the coffee pods. Naturally, given that the pods are lucrative and easy to make, there have been imitators. A large number of companies have sold, over the last few years, their own “K-cups,” pods of coffee designed specifically to work in Keurig’s machines. Consumers love this, both because competition lowers prices and because it expands the range of roasts and flavours available.
To fight the onslaught of packagers of (perfectly legal) pirate K-cups, Keurig recently starting selling its “Keurig 2.0″ line of coffee makers. The 2.0 machines incorporate a digital rights management (DRM) system, designed to ensure that Keurig machines work only with Keurig branded and Keurig licensed pods, effectively shutting out the competition, at least temporarily. The result is that all those non-licensed Keurig imitators won’t work in the new 2.0 machines.


















Preeecisely the point I was making above. 