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Is Google Really Subsidizing the Nexus 4?

November 6, 2012 - Written By Tom Dawson

There’s been a lot surrounding the price of the latest Nexus phone to come from Google and LG, with higher prices in parts of Europe as well the phone, eventually  costing more if you were to sign up to a T-Mobile contract. It’s beginning to look like Google has subsidized their latest Google phone as they’re selling it for $299 for 8GB and $349 for 16GB which is really quite cheap for an unlocked smartphone that packs as much in it as the Nexus 4. However, these desirable prices don’t seem to be constant throughout the globe. Some parts that don’t have access to the Play Store are looking to buy the device through retail outlets and this is what’s causing a bit of a stir, with Spain’s Phone House stores refusing to sell the device because of how much LG are asking for the units.

Pricing problems leads us to ask whether or not Google are subsidizing their new Nexus phone and on the surface, it certainly looks like it. What we need to look at here though, is what happened with the Nexus 7 and Amazon’s Kindle Fire line, these tablets sell for an incredible price but, does this mean that they’re subsidizing these devices? No, because Google and Amazon have powerful revenue streams just waiting for when consumers get these devices into their hands. The Play Store and of course, Amazon’s online offerings are fast becoming extremely lucrative and making it easier and easier for the two online giants to not care about the prices of their tablets. With Google, their main goal is to get the phone in the hands of as many people as they can, to make sure that stock Android is put out there in a big way and also, to further push the sale of apps, games, music, movies, books and magazine through the Play Store – of which they take a cut of everything.

How much the phone costs from Google isn’t really an accurate representation of a phone sale, because Google don’t particularly care how much they sell the device for. Their main aim is to fulfil one simple goal: “How cheap can we make this?” the answer turned out to be very cheap and whilst Google are more than happy to buy the units from LG and sell them off at either the same price or just pay off the distribution costs, LG will want profit. I doubt that LG would like to sell a phone full of high-end parts for the same price as Google and I’m fairly certain that it wouldn’t make much sense for them to do so, either. Then we need to realize that the retailer will have to make a profit on selling the device, otherwise there’s no point in buying the stock – Phone House in Spain aren’t going to make any more money of of you once you leave the store whereas Google will do.