Early in 1958, representatives of IBM came to see a prototype. Haloid Xerox of Rochester, New York, a small maker of photographic paper in the 1940s, had spent years developing Chester Carlson’s process for copying onto ordinary paper, and it now had a machine, the Model 914. The company worried that its own sales and service force would be too small if the machine succeeded, so it considered letting IBM make and sell it.
IBM said it wanted to study the matter. It hired the consulting firm Arthur D. Little to estimate the market. According to the findings of a federal court that later heard the history at length, Little’s report found the office copier field “highly competitive,” dominated by 3M and Kodak, and “attuned to smaller and less expensive devices.” The report ended IBM’s interest. The court found that the turndown “came as a shock” to the company’s president, Joseph C. Wilson.
Haloid had heard discouraging numbers before. John Dessauer, its head of research, recalled in a 1971 memoir a market survey for which one firm, “after questioning vast numbers of businessmen, reported that we could not look forward to placing more than five thousand copiers in American offices!” If that was right, he wrote, “We might as well forget producing a copier and accept our loss.”
The 914 also cost too much to sell. Its direct manufacturing cost was over $2,000 a unit, the court found, while most competing copiers sold for a few hundred dollars. Any selling price, compared with what the market was used to, would look so high that the machine would find no real reception. A flat monthly rent ran into the same wall.
So Haloid didn’t sell the machine. It leased the 914 at a low monthly minimum and charged essentially by usage. The court recorded the initial pricing as 4.75 cents a copy for the first 2,000 copies and 3.5 cents after that. A customer could cancel on fifteen days’ notice. Every copier in the field could be sent back.
In the court’s phrase, Xerox “nevertheless proceeded and tried to create a demand for the 914.” Wilson, announcing the machine, said the company had seen a need for one machine that would serve “both as a copier and a short run duplicator.”
The 1960 annual report said orders in the 914’s first nine months were “substantially more than we had thought possible.” Then a second surprise: “the average use for the machines installed has been much higher than our projections.” The copying market was growing fast, the court found, “as people were finding new needs and applications for copying.”
By 1965, according to the appeals court, Xerox had captured 80 percent of the US market in plain and coated paper copiers.