Nexus pricing: The European Nexus controversy (updated: maybe it's not as bad as it looked)

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When the Nexus 4 launched one of the biggest surprises was its low price. Starting at $299 this is possibly the cheapest flagship smartphone to be released unlocked in the US. And even for this price Google managed to cram in some of the best internals out there and bump the build quality up a notch compared to their previous flagship as well.

This pricing is no doubt a move to step away from carrier control and the standard of buying phones subsidized by a two year contract. Something Google has been trying to do from day one, when they released their first Nexus device. As can be read all around the web, this choice has not been without a fair share of controversies. The lack of support for LTE networks has been painted as a weak and spineless move by Google to avoid carrier involvement. Especially since Apple and Samsung have managed to limit carrier influence in the past.

Most likely the problems Google had with releasing timely updates for the Verizon LTE version of the Galaxy Nexus had something to do with their decision to opt out of LTE this time around. It is unfortunate that Google couldn't manage to get a better deal, but there is something to say for sticking with your principles and going for a pure Google device with no carrier influence at all.

When we step outside of the US though, these principles start to fade. In an area where the LTE controversy is much less relevant a different danger is lurking for the Nexus line.

The price is right... or is it?

It turns out that outside the Google Play store, the Nexus 4 may not be such a bargain. LG controls the pricing through other retailers online or offline. And unlike Google, LG has little to gain from selling the phone at cost. In fact sticking with the low prices Google charges through their Play store would cannibalize sales of their own, very similarly specced flagship, the LG Optimus G.

As a result LG has announced MSRP for several countries across Europe at €599. This is more than twice as much as Google charges for the same 16GB model in the US and almost twice as much as Google charges through several European Play Stores, where the 16GB version costs €349.

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In an outrage over the pricing disparity a lot of companies have already refused to sell the Nexus 4 unlocked. Among them is The Phone House in Spain. The Phone House is owned by the Brittish Carphone Warehouse and has stores in most European countries. In a statement on their Spanish Facebook page, they state that they have chosen not to sell the Nexus 4, because they wouldn't be able to get the best price for their customers. Their statement reads:

(translated)

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.

However, the company still plans to sell the Nexus 4 on contract in most countries. Using the contract subsidy to hide the massive price difference. The on contract pricing is expected to be comparable to other, much more expensive flagship smartphones. In fact most carriers are planning to offer the phone on contract as well. Their model is comparable to the T-Mobile US contract, which also charges about the same as any other flagship phone.

So while Google has put in every effort to lower the price in order to get rid of the carrier tie in, the prices LG is setting around Europe may actually accomplish the exact opposite. This may not be much of an issue for consumers in countries where they can just as easily buy the phone in the Google Play store. However, as of now, the Devices store on Google Play is only available in the UK, France, Germany and Spain. The rest of Europe will be stuck with LGs retail pricing.

What about the other Nexus devices?

Rumors say Samsung is simply avoiding the issue altogether and isn't selling the Nexus 10 in many European countries. Samsungs own 10" tablets are priced €499 and up and the Nexus 10 even beats those when it comes to components like the high resolution 2560x1600 screen and the latest Exynos chip. Instead of having to sell those at something closer to €600 they leave it up to Google to sell the Nexus 10.

All of this is very disappointing especially since the Nexus 7 is sold in most stores for prices very similar to the pricing in the Google Play store. Apparantly ASUS is willing to play Googles game, it is unfortunate that LG and possibly Samsung will not.

Black market trade

Around the web a lot of people have started to suggest that this pricing strategy may lead to black market trading activity. When the very same phone is worth almost twice as much, right across the border, it starts to be a lucrative opportunity for people looking to make a bit of extra coin. Whether this will actually happen is hard to predict. Especially since Google has complete control over the only retail channel that sells the Nexus 4 for the much lower prices. It would be very easy for them to intervene by blocking large orders to the same address. Either way, the much lower prices in other countries will make consumers feel like they are being ripped off when they go to a store to buy the phone. It will leave a bitter taste in the mouths of many prospective Nexus 4 buyers, especially those without access to the Google Play Devices store.

Note: Retail pricing across Europe may differ per country and MSRP hasn't been announced for every country yet. It is also possible that actual prices will be lower in certain stores, but it's unlikely they will come even close to the €349 Google is charging.

Update: MediaMarkt Germany has the Nexus 4 up for pre order now. At €395 it's still not as cheap as in the Play store, but it's much cheaper than the retail prices suggested by LG so far. Note though that no MSRP has been announced by LG for Germany yet. Whether MediaMarkt will stick to this price in other areas is unclear as of now. The price may just be lower in Germany in order to better compete with the Play store pricing there. It's not exactly a certainty for anyone outside of Germany, but it brings a shimmer of hope that actual retail prices may be closer to Googles prices.