Google announced that a Nexus 4 smartphone will be for sale at Google Play stores. Without any contract, consumers may purchase an unlocked device for $299 (16GB) and $349 (32 GB). This is without a doubt a game-changer for the industry.
In the United States, consumers are locked for 2 years on a subsidized phone. Upgrading phones or breaking the contract is costly. In Canada, the contract is 3 years. Only in recent years has no-contract become a more appealing option. New entrants like Mobilicity and Wind Mobile are disrupting the mobile contract market. For the time being, these companies account for a small percent of the mobile market, but as no-contract phone prices decline, their threat to the incumbents intensify.
Google’s Nexus 4 smartphone is a disruption to mobile pricing. Here are the reasons:
1) Linus Torvalds said that unlocked, Google Nexus phones give consumers the option for a cleaner android experience. Torvalds installed CyanogenMod on Samsung to gain a Jelly Bean experience. Nexus is even more compelling, because the interface is even nicer.
2) For US $299, consumers are not locked to any carrier. This gives more freedom for switching to different carriers, updating the phone any time, and having a phone with no carrier-specific clutter.
3) The pricing is so low that a Spanish retailer is suspending sales of the device. Story is here.
Nexus 10 Tablet
In the tablet space, Google Nexus 10 is another disruption for Apple and even Samsung. The device is considered to be on par with Apple’s iPad display, battery life, and performance. Pricing is lower than that of Apple iPad, but similar to challenges being faced by Microsoft’s Surface and Nokia Windows Phone, Nexus 10 has a limited ecosystem for tablet applications. Nexus 10 will need to convince consumers that it is worth saving $100 for a less-developed app selection.
Nexus 7 Tablet
Apple’s release of the iPad Mini was met with criticism on its price. In Toronto, there was a small line-up of around 100 people at Eaton Centre, far lower than the line-up for the iPhone 5 launch. Apple may earn at least 43% gross margin for the mini: it costs $188 to build. The 16GB Nexus 7 costs $160 to build and sells for $199, a 25% margin. Amazon’s Kindle Fire HD costs $159 (with special offers) or $174 without offers.
There is little doubt that all of the Nexus device sales will be strong. In the tablet space, critics may point to limited applications for the tablet, a problem that plagued Research in Motion when it released the Playbook and struggles to maintain market share with its existing smart phone platform. Microsoft might be looking at how important it is for having a countless number of apps in an ecosystem. The Surface RT is a beautifully designed product that is being criticized for its limited apps. The tablet was launched concurrently with Windows 8.
In the smartphone space, the $299 Nexus 4 is going to be a game-changer. The phone is a good build, runs on Android 4.2, and its price is unmatchable relative to the specifications of the device. On the negative side of things, the phone does not have LTE, and the glass backing could possibly break.
Further reading: Nexus 4 review.