Google's Android VP on why a pricier Nexus 6 may lead to higher sales

The Nexus 6 is a more premium take on the Nexus smartphone. Google

Google is taking a different tack with its launch of the Nexus 6 smartphone: Following the standard flagship phone playbook on pricing and carrier relationships.
In an era where the iPhone 6 and Galaxy S5 are assumed to be available virtually anywhere, it would seem obvious to anyone selling a smartphone that having wide distribution was critical. But Google hasn't always followed a conventional path with its Nexus products, which are held in high regard by Android enthusiasts but largely ignored by mainstream consumers.
That changes with the Nexus 6. At a starting price of $649, it is in line with a typical premium smartphone, a break from the Nexus line's history of focusing on affordability. And for the first time for any Nexus device, it will be available at all five major US carriers -- Verizon Wireless, AT&T, Sprint, T-Mobile and US Cellular.
"We are selling the Nexus 6 in a way most people are used to buying it," Hiroshi Lockheimer, vice president of engineering for Android at Google, said in an interview Wednesday.
The decision to create a more expensive, premium device that is more readily available suggests a maturation of the Nexus line. The primary goal of a Nexus device has always been to serve as a vehicle to show off the latest version of Android, largely attracting developers and enthusiasts. But the Nexus 6 phone appears poised for more mainstream attention.
"That's a major shift in the Nexus model," said Jan Dawson, an analyst at Jackdaw Research.
The decision to go with a more expensive product was a result of feedback that showed interest in a more premium-feeling smartphone, Lockheimer said. The result was the Nexus 6, which features a large 5.9-inch quad-HD display, 13-megapixel camera with optical image stabilization, front-facing speakers and an aluminum frame. Constructed by Motorola Mobility, it unsurprisingly features the same design scheme as the new Moto X.
While counter-intuitive, Lockheimer said he believes the more traditional price tag will actually help spur sales. Google has traditionally promoted its own Google Play store as the primary source to purchase past Nexus devices, with the Nexus 5 selling at $349 as an unlocked smartphone with a contract. Working with the carriers, Google will be able to sell the Nexus 6 at $199 with a two-year contract, which at first glance seems cheaper.
Most savvy customers will know that the rest of the cost of the device is baked into the higher service fees charged by the carriers, but the move to this more traditional pricing structure will help get the Nexus 6 in more stores, with more average customers willing to take a look at the device.
"Nexus fans understand the pricing model of an unlocked device," he said. "But outside of that, paying $350 upfront was a foreign concept."
While more expensive, the Nexus 6 holds its own against the competition, Lockheimer said. The jumbo smartphone, which falls into the category of phablet, or a mash-up between a phone and tablet, stacks up against the iPhone 6 Plus, which starts at $749 unlocked or $299 with a two-year contract, and the Galaxy Note 4, which costs $700 unlocked or $300 with a contract.
Google, of course, could have sold an even less expensive Nexus device under contract. But the company, working with Motorola, made the decision to focus on specs and capabilities first.
"It was a deliberate decision to push the boundaries on technology," said Sandeep Waraich, a Google product manager working on the Nexus 6. "We first arrived at the solution, then the price."
If Google wants to increase the reach and sales of its Nexus products, it may no longer be comfortable with the razor-thin margins of previous devices. While Google hasn't publicly talked about the profitability of the business, industry observers believe the company barely makes money on the devices, or even takes a slight loss, in order to drum up attention for the Android platform.
"If Google wants to start selling these devices to the broader market, and therefore sell many more of them, it can't just keep selling them at cost -- it has to actually make money on them," Dawson said.
It's a strategy that worked well with the Asus-built Nexus 7 tablet, which was highly regarded because it started at $229. The Nexus 4 and Nexus 5, both built by LG, were also popular phones because of their low non-contract price.
The Nexus 5 remains an option. But while the Nexus 7 is still available through retailers, it has been removed the Google Play shop. In its place is the Nexus 9, a more premium-feeling tablet that has an aluminum frame, higher-end specifications and a starting price of $399. Google went to HTC to build the tablet because the Internet titan liked what HTC had done with the design of the One.
Lockheimer also dismissed the rumors that Google was scrapping the Nexus program, pointing to the two devices, as well as the Nexus Player media-streaming box, as proof that the company continues to invest in this area. He declined to comment on Android Silver, a rumored line of high-end smartphones from various partners all running the latest unaltered version of the Android operating system.
He also cautioned against reading too much into the higher priced devices. The Nexus program was designed with the purpose of experimenting in different areas. Its goal has never been about volume but about building hardware to test out its software. Google generates a vast majority of its revenue and profit from its traditional online search business.