http://www.nytimes.com/2005/10/08/technology/08photo.ready.html

Pricing, Complements, and Substitutes
by Mark Pearson

The accompanying New York Times article provides an enlightening 
discussion about how pricing, complements, and substitutes work in the 
photograph printing space.

On one side, we have the printer and ink industry.  We've already
discussed many times how these businesses are following the razor blade
model of providing the base unit of the complement (printers) at very low
cost and charging a high price for the recurring item in the complement
pair (ink cartridges).  The price to customer of this model is mostly in
recurring costs but still depends somewhat on the quantity of usage --
whether the printer can be pro-rated over enough photos to become truly
negligible in cost.

On the other side, we have a substitute: the retailers' photo labs.  
These generally charge fixed rates per printed photo.

And we have yet another substitute: the online photo hosting sites.  
These usually allow ordering of printed copies of photographs they host.  
These, like the printer-ink industry, also work on complements because
hosting photos goes well with ordering printed photos.  This model also
mirrors the printer-ink one, usually with low or no hosting fees and then
a charge based upon quantity of printing.

Although the article doesn't go into it much, this last model is slightly
complicated by the fact that most people print photos in order to share
them, but online hosting already provides sharing.  In this sense, online
hosting is a substitute for printing (in addition to printing being a 
complement to hosting).

The article claims the observed behavior reflects rational buying habits
(citing the "wisdom of the crowds" and "tuning out the marketing").  I'm
slightly surprised that customers are sophisticated enough to sort out
this big bundle of complementary and substitutable products, but then the
types of people that have adopted digital cameras might be knowledgeable
enough to understand which option (price + convenience) is best for them.  
And money is always a good incentive to make people think about decisions.