Spanish Retailer Suspends Plans To Sell Nexus Due To Pricing, Is Google Subsidizing Play Store Purchases?

I’ll be the first to admit that my first reaction to T-Mobile’s Value Plan pricing on the Nexus 4 was one of aggravation and frustration. As I saw it, T-Mobile appeared to be bumping the off-contract price against Google’s own pricing making any Value Plan deal with T-Mobile not much of a deal at all.

As it turns out, perhaps the fault doesn’t rest at T-Mobile’s feet, but at Google’s. The disparity with pricing from T-Mobile isn’t what set off my concern that perhaps I jumped the gun, it was a story coming out of Spain and Italy that has LG hiking up the price of the phone causing at least some carriers to back away from carrying the phone altogether. This price hike has caused Spanish retailer Phone House, Spain’s version of the UK retailer Carphone Warehouse to announce via its Facebook page that they planned to suspend sales of the Nexus 4.

Madrid, November 2, 2012

Phone House, the largest independent chain of telecommunications in Europe and Spain, it will release the new Google Nexus 4 and LG, whose launch was scheduled for November 13 in the catalog of this month

Phone House has decided to suspend the sale of this product after finding that the recommended retail price by LG of 599 € and conditions offered for commercialization are worse than the MSRP published by Google on its website and does not maintain the commitment with customers and offer the lowest price guarantee that characterizes Phone House.

Fortunately, Spanish customers are fortunate enough to have access to the Play Store and the ability to buy devices directly from Google. Whereas Google’s price will be €299 for the 8GB model and €349 for the 16GB model against LG’s price to the carriers of €599. Needless to say, the price isn’t competitive for the carriers when compared to Google’s own Play Store offering.

The same carrier concern is reaching over into Italy and Austria, where customers cannot purchase directly from Google and the Play Store. Therefore, they are at the whim of the carriers and thanks to LG’s price hike, customers are feeling a little slighted. This is where my concerns over T-Mobile’s Value Plan pricing comes into play, why pay carrier pricing when you buy directly from the Play Store?

All of this begs the question whether or not Google is subsidizing the price of the Nexus 4 through their own channels to lock in future Play Store sales. If that is the case, I can’t lay the blame at T-Mobile’s feet and I did jump the gun placing blame and directing my frustration Magenta’s way. Still, all things being equal, there’s an argument to be made that you should buy the phone directly from Google, contract free and not include the carrier.

Which takes us back to T-Mobile and my original concern that T-Mobile was just adding in a high margin, but perhaps I was wrong in that regard too. The problem is that we’d normally never think twice about a $500-$600 off contract price because thats a fairly standard no-contract price for top of the line smartphones. The Nexus 4 is a unique case because of the disparity between carrier pricing and that of Google. Which again begs the question whether or not Google is taking a smaller cut and/or razor-thin margins to get this phone into the hands of as many people as possible, including developers. Google is likely less worried about profit from the hardware and more worried about how much they can proliferate the market with stock Android devices.

That may be well and good for Google , but it seems as though pricing over the Nexus 4 and carrier subsidies is causing a lot of aggravation around the world.

TheNextWeb, LG Facebook

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  • http://www.kdmstance.com BiGMERF

    buy from the play store no matter how it plays out.. lol

  • Culprit

    Google is a sleezy and invasive a species as has ever existed. I hope Tmo gets some decent Windows Phones going and the iPhone. They almost have all of their eggs in the Android basket right now and I sense that Google is about to start selling phones direct to the public at much lower prices to temp people to be fully attached to their ecosystem. Tmo can get caught leaning the wrong way when the Android backlash inevitably picks up steam.

    • jimkenobi

      tmobile would like you to buy your phone from someone else. they make money on plans not devices.

    • DJ Lawless Oneâ„¢

      Because Microsoft so much better than Google.

    • atari37

      “Google is a sleezy and invasive a species as has ever existed.”

      Wait, what? You know the prices set for non play store devices aren’t set or controlled by Google right? In case you haven’t heard, Google already came out and said OEM’s are ripping people off with their tablet and phone prices and that OEM’s are not happy about what Google is charging for the Play Store Nexus devices.

  • archerian

    The actual Nexus 4 device should cost around $200 to manufacture, including labor and packaging (especially since it has no LTE licensing, lesser Flash memory, no SD Card licensing), so Google and LG could still be making a profit, although a small one. But yes, its priced to ensure maximum penetration, especially in heavily prepaid markets. I think its Google’s foray into the Prepaid base, after all around 75% of the world is prepaid, and its a world phone.

  • whiteiphoneproblems

    Well-written, David… It would be interesting to know what the wholesale price of the phone is (when LG sells it to a carrier), and also whether carriers are required to sell at LG’s “recommended” retail price (given the reference to “conditions offered for commercialization,” I suspect they are).

  • Izz Da Wizz

    So will my Tmo insurance still cover my n4 if I buy it from Play store even though tmo is selling it as well??

    • zacamandapio

      That’s the questions I’ve been asking. Still no answer.

      • thepanttherlady

        Call Asurion and ask. They would be the ones with the most accurate answer, yes?

    • io

      i really don’t think so.

    • bleeew

      Don’t you have to buy it through T-Mobile?

      • Jason Crumbley

        No, you don’t.

    • Jason Crumbley

      Yes it will. I bought a GS2 off of ebay last year. When you activate the phone, go to your profile on their website and change the device to the one you are using. The insurance will cover it.

  • mikkej2k

    Great phone. Great price.
    Could this be for a limited time? ( the Google Play store price )
    Does T-Mobile charge for the micro-sim?

    • MacRat

      “Does T-Mobile charge for the micro-sim?”

      Depends a lot on the employee you approach.

      Some employees will just swap your SIM for free.
      Some employees will sell you the SIM from a $20 startup kit.
      Some employees will try to sell you a whole new plan.

      • Matlock

        They might charge for the Micro-sim, when I worked for T-Mo they used to have us charge $10 for Micro-sims for iphone users. Though we didnt have to charge customers who actual T-Mo phones that used micro-sims. At this point though, I dont think they charge for Micro-Sims since most of their new phones use Micro-sims.

    • Bob Omb
    • archerian

      a SIM or micro-SIM is usually available for 99c shipped on T-mobile.com, I’m guessing that could work

      • ji

        that is how i bought it i pay $1.06 total, i got an email saying it was ship yesterday. :)

    • psoohoo

      I called customer service and they are shipping me one for free. As far as i know its free, i guess i have to wait for the next bill. I told them I was getting an iPhone to use on t-mo.

      • http://www.facebook.com/people/Jamille-Browne/1184321457 Jamille Browne

        The micro sim? you could have just walked in and got one.

    • enoch861

      It depends. The so called “corporate” stores don’t charge. Just walk in and tell them you want s micro-sim and they’ll ask for your number and hand you one for free.
      Other T-Mobile stores will make you pay the 20.
      The other surefire way to guarantee a free micro-sim would be to call T-Mobile and have them make a note on your account to get a free sim. Then waltz into your local store and receive a free sim no questions asked especially since there’s a note on your account.
      But yes, as a T-Mobile customer your always guaranteed free sim cards. Its just some stores are stupid and insist on charging but a quick call to customer service will rectify the issue and get you a free one. So never buy a T-Mobile sim card if your a T-Mobile customer.

  • mikkej2k

    Has there been a teardown to determine the price of the components and the overall repairability ?

  • itsallbs

    compared to a nexus 7 selling at $200, how is it wafer thin margin(or subsidizing) selling the nexus 4 for $300/$350? What does the phone have so much more than the tablet other than the radio?

    • atari37

      It amazes me how much people complain about things like this. You are getting one of the best phones on the market at the lowest price, yet people still complain. The Nexus 7 is not portable and cannot be used as a phone, it doesn’t have a Radio in it and it is missing a lot of other things the Nexus 4 has.

      The fact that no one has ever sold an unsubsidized phone with these specs for anything close to $350 mean a lot for the smartphone market. I bet that if they sold this thing at $200 people will still complain. If this is not cheap enough I don’t know what is.

      • itsallbs

        I’m not complaining about the $350 price tag. I know its a game changer for the smartphone industry. Considering the BOM for iphone is around 200, one can assume the same for nexus 4(maybe not). I was just referring to the author mentioning about google subsidizing.

        • philyew

          Unless LG have dramatically different production costs, or a different revenue model, we can see from information released by Samsung during the recent trial that they charge carriers around $450/unit for top-end smartphones, and the other manufacturers are likely to be in the same ballpark.

          You need to add R&D, production, marketing etc to the BOM, and then a healthy margin to arrive at the manufacturers wholesale prices.

          Google will likely have fashioned a good deal with LG in return for allowing them to the table in developing the Nexus series, which has previously been the province of HTC and Samsung. That may have capped their wholesale expenses so that their price in the Google Play store will be close to cost.

          I doubt that the Nexus 4 price will prove to be a game changer. There are several negatives about this device that Google will be marketing against here in the USA: No LTE. No CDMA. Limited onboard storage and no expansion capability. A difficult process to change the battery against an underwhelming battery performance. While there are some other excellent features, one or another of those limitations would have been a significant negative for a lot of people, if they were contemplating paying $500+ for the device.

    • ji

      seriously?

  • BrianC

    Since Google is having “issues” with “root to remove” carrier bloatware and update speeds (Verizon & Sprint in the US), does anyone else see this as a “shot across the bow” from Google to carriers?

    • Roger

      Note that Google gives your carrier a cut of play store sales you make. When you make a purchase ~70% goes to the developer, and ~25% to the carrier. This 6 month old article gives a good idea of Android economics http://www.asymco.com/2012/05/14/the-android-income-statement/

      • psaux

        It may be that you misread the article. That says it *averages* out to 25%, but then goes on to say that it’s because the apps are sometimes purchased with carrier billing, and sometimes not. Further, it notes that when carrier billing is in play they may collect more like 45%.

        So, I get the impression that if you’re doing a normal, pay-google-directly transaction, the carrier is probably not getting a cut.

        Of course, I could be the one that’s mistaken. (Though I do have reasonable confidence, since this version seems to make more sense.)

  • http://littlebigideas.tumblr.com/ JakeMG

    They’re not really subsidizing based on Play Store sales as much as they want everyone to use search. The more Google searches performed, the more data Google has to improve those searches, which equals more advertising dollars for Google. Their business is about search, and Android exists, mostly, to enhance search. Sure, they make a small percentage from books, movies, apps, etc, but that’s a small amount compared to how much the constant searches improve the relevance of Google’s searches, making them more marketable.

  • atari37

    I think there’s a lot behind these high prices that none of us understand. Personally, I think T-Mobile wouldn’t have carried the N4 unless they were able to Jack up the price. I mean, how would they sell a GS3 for $300 on contract and sell the N4 for $300 without a contact? That wouldn’t make a whole lot of sense now would it? Perhaps the deal behind this partnership was to give people an opportunity to demo the phones at a physical location. I don’t think most people will buy this phone at $200 if they can get it for $300 online without a contract, but that’s just my thinking.

    • philyew

      Perhaps you missed in the article that LG’s MSRP in Europe is 599 Euros, which converts to massive $767. It’s actually possible that, rather than jacking up the price, TM are themselves taking a hit by selling the device at $500.

      Everyone so far in the debate here has spoken from the assumption that TM are buying the phone from Google, but the stories out of Europe indicate that carriers and retailers the world over may be buying directly from LG…and LG has absolutely no responsibility to respect the pricing decisions that Google chooses to adopt for its own strategic ends.

      There is still no indication that TM are paying any less than they do elsewhere for top-end smartphones, which is upwards of $450 wholesale (see the Samsung US sales/revenue declarations in the Apple lawsuit for evidence.)

      • atari37

        I like how some people on the internet talk like they know what goes on behind close doors. We can all speculate but the fact that none of us sit in on these meetings mean that we don’t know jack.

        “It’s actually possible that, rather than jacking up the price, TM are themselves taking a hit by selling the device at $500″

        Explain this quote to me. How does it make sense for TM to directly carry this phone in their stores if it means they take a hit? Does that make any sense to anyone on here? T-Mobile is all about brings your own phone. If the phone is selling for $300 without a contract, why on earth will T-Mobile decide to sell it directly for $200 on a two year contract or $500 off contract. Especially, if they stand to take a hit on every sale. They would be better off not selling the phone directly at all. Again, I just looked at that quote and it doesn’t make any sense at all. It makes more sense that T-Mobile was asked to be a launch partner and they agreed but with the stipulation that they would sell the phone at a higher price than the play store. At the play store price, they will be cannibalizing all their other phones in TM stores.

        Another thing that is being talked about is that LG is selling the phone to other carriers at a higher MSRP. Well, yes that could be the case but we don’t know why they are able to do this. The only thing that makes sense to me is that Google came to them and said “make us X million N4′s at this price, you are free to sell the phone at your own set price elsewhere”.

        The only way Google can control prices everywhere in the world is if they make their own devices. Apple does it, Microsoft does it and it’s time for Google to say screw it and make their own devices and be in full control. They already own a big hardware company.

        • philyew

          If I was pretending to know what’s going on behind closed doors, I wouldn’t have said it’s “POSSIBLE” they are taking a hit.

          We do, however, have some objective numbers to work from which hint at that possibility. We know, for example, that Samsung declared an average income per unit of $434 from selling the Vibrant to TM with an MSRP of $500.

          The same source (the disclosures in the Apple lawsuit), reveals they charged an average of $454 for each Galaxy SII they sold to TM with an MSRP of $530.

          Both devices therefore yielded margins in the $60-80 range for TM, which will have covered their related costs (i.e. marketing, sales, support) and whatever profit they could take. To this might be added any income from the bloatware installed on the devices.

          We know that the MSRP for the Nexus 4 over in Europe is 599 Euros, which converts to over $750.

          We know that TM are selling the device for $500.

          We know that, as this is a Nexus device, there will be no income from bloatware.

          Since TM would need to be paying no more than around $420 to establish the same margin as they derived from the GSII, it doesn’t take a lot to deduce that there is a real POSSIBILITY that selling a device for $500 with a higher MSRP could result in a reduced margin.

          That’s what I mean by taking a hit. Not necessarily carrying a loss, but not making as much money as they have been able to selling previous devices.

          Balanced against this is a marketing opportunity which TM may have felt they could not pass upon.

          There is no CDMA version of this device, and, lacking LTE support, it isn’t going to be of great interest to AT&T. Nevertheless it is the Google flagship brand and it is probably the last device that Google will produce with such unique attributes (or lack thereof) which will favor TM.

          I didn’t make any positive assertions, but a little bit of digging and logical reasoning result in the POSSIBILITY that they could be taking a hit on that price.

          Try applying the same information to your assertion that they are jacking up the price and see whether it still makes greater sense.

  • jian9007

    I think it’s important to remember when talking about any device or smartphone, that the cost of the components is just that. The hardware component price. It doesn’t put itself together or market itself, or develop itself. So when talking cost, remember that hardware is just one aspect of the product. The cost of development, testing, labor, marketing, etc., must also come into play. That’s why the Nexus 4 is a fantastic value for dollar. As a user, you essentially get a pure Google version of LG’s flagship phone (Optimus G) without a contract for only $349. The no-contract price of the Optimus G on AT&T and Sprint is $549. So yes, essentially Google is eating a chunk of the subsidy ($200 in Google’s case) that carriers usually do (AT&T, Sprint, and T-Mobile eat $350 of it with contract, selling it for $199).

    • AndroidProfit

      Don’t bring facts into this! You are going to hurt the brains of those that post here. They can’t complain about a big evil company ripping them off if you provide them with facts and rational thought! I mean make them take responsibility for themselves?

  • niididdy

    I’m buying from Play Store…so I’m not necessarily worried LOL

  • Y314K

    So is Google subsidizing all of the Nexus 7′s I keep seeing at MicroCenter/Staples/International stores and a bunch of other brick&mortar stores around town for the same price as the Play Store but won’t do the same for the Nexus 4… Or is it LG that is choosing not to give the same deal to non-Google re-sellers… Something is missing from this story….

    Non-Play Store Nexus 7 pricing vs Nexus 4 Non-Play Sore pricing does not make sense…

    And why can’t TMobile just put a big order thru the Play Store for the Nexus 4 & just resell them for a $25-$50 mark up on a Value Plan… Come come TMobile… Get creative…

    • TMOTECH

      The Nexus 7 is manufactured by ASUS. Maybe their process is cheaper.

      • Y314K

        A 7″ screen should not be cheaper then a 4.8″ screen….

        • TMOTECH

          I said their manufacturing process might be cheaper. Cost of labor, engineering, other materials.

        • Y314K

          That may be… But their manufacturing process won’t make it twice the price that Google is charging for it… Google is gonna charge at cost for the phone… Google is not loosing money on the hardware just breaking even and making their profit on the data mining…

    • atari37

      T-Mobile doesn’t sell anything that can compete with the N7 so there’s no need to jack up the price to match other devices. That’s why I think the N7 sells at the same price as the play store. The N4 on the other hand has a lot of competition with T-Mobile’s other high end phones.

      • Y314K

        But it’s not just TMobile that sells the N7 at the same price.. And not just in one market… TMobile could put u’r order in thru the PlayStore & get the phone for the PlayStore price & just finance the different after the down payment if it really wanted too… But the only thing TMobile wants right now is to get u on a Value Plan while at the same time jacking up all their phone prices now matter what… They keep charging One-X prices for One-S phones…

  • steveb944

    I for one am glad Tmobile will carry it so I can see it in person before ordering in the Play Store. It really is too bad for those overseas though, thank goodness we’re in the States

  • Jason

    We (T-Mobile reps) just got word that most stores won’t be carrying the Nexus 4 at time of launch. I’m pretty bummed cause I know this phone is going to do really well and I was anxious to get an opportunity to play with it before placing my own order.

  • Jeff Martinez

    Buying my Nexus 4 on launch day, sucks for the people in other countries without the play store, Google needs to get their play store as far as they can reach globally

  • ali

    TMobile should just buy it from the play store too and sell it from there lol

  • http://www.facebook.com/unfazedrebel Jé Be (Here but Gone)

    T-Mobile is obviously more privy to more information than we are…..so if they want to be dumb and buy a device for mark-up & try to sell it , when the same device & plans be had @ a lesser price…well…..that’s their fault….they didn’t spend the $ to carry the iPhone they just announce it works on their network…the same should have been for these flagship phones….you don’t see Louis Vuitton with a Wal-Mart line manufactures too should SLOW DOWN on device releases to fit the life of a contract or do YEARLY releases. No more than 1 or 2 devices that way FOCUS can be had for software updates. Releasing three different variants of the same phone seems like a waste to me…..they need to decide what crowd they will cater too and people need to be original and stop copying each other if they are going to do that they might as well MERGE as ONE an split the profits…..