After announcing that its Nexus 5 costs $100 more than what Google charges for the handset, T-Mobile said that it doesn’t make a profit on Nexus 5 sales, suggesting that Google is quietly subsidizing the device.
The T-Mobile Nexus 5 (16GB model) costs $450 – comprised of a down payment of $42 and 24 monthly installments of $17 each – which is precisely $100 more than what Google is selling the device for in the Play Store.
But T-Mobile is not pocketing the extra $100, CNET says, after having talked to a representative of the carrier. T-Mobile customers will apparently pay the full price of the handset, while those buyers that get it from the Google Play Store will get it cheaper.
When announcing the handset, Google did not mention anything about a subsidy, and while it may be questionable, it does sort of make sense.
After all, just because Google is willing to sell the handset starting at $349 doesn’t mean that LG is also interested in selling a handset with flagship specs for anything less than a flagship price.
At the end of the day, LG only makes money off the Nexus 5 by selling it either together with Google or with carrier partners. But Google can further profit after Nexus sales from the content it sells through the Google Play Store and the related advertising revenue it generates from Google services users.
That’s probably even more so when you add in the better tailored ads that can be served to those users that trust Google with a lot of information, such as Google Now users on Android devices such as the Nexus 5.
So in theory, Google may end up making up for any losses caused by such subsidies.
But would Google subsidize it for $100? The answer to the question doesn’t really matter. What’s clear is that the Nexus 5 is getting plenty of attention from interested buyers, which is good news for Google and its products.
This also doesn’t mean that everyone else has to sell it for the same price, T-Mobile included, and it’s up to the consumer to choose where to buy the handset from.
We’ll remind you that the Nexus 4 also happened to be cheaper in the Play Store than in carrier stores. Does that mean that Google subsidized the Nexus 4 as well? Does it really matter?