After the controversy surrounding the PureView camera on the Lumia 920, Nokia is back with another blunder. Nokia recently revealed the Lumia 920's pricing in Europe, based on which Nokia may have another dud on its hands. The pricing decision may also have played a part in the uncertainty surrounding carrier partnerships for the Lumia 920 launch, which sent the stock price crashing recently.
Let's start by taking a look at the average price of the Lumia 920 in Europe (as per Nokia's announcements), other windows phone devices and market leading devices:
Most media outlets have been up in arms because the Lumia 920 has been priced above the Samsung Galaxy S3 and almost at par with the iPhone 5. While this would be a factor against high-end models, the limited ecosystem would be a larger competitive disadvantage. My prime concern is how Nokia's WP8 based Lumia devices have been priced against their counterparts from HTC. HTC's high-end model, the HTC 8X, has been priced far lower than the Lumia 920 and almost at par with the mid-range Lumia 820.
This decision could also explain why Nokia refrained from announcing the Lumia 920's availability & carrier partnerships during the unveiling. HTC, on the other hand, announced partnerships with 150 carriers in 50 countries for the 8X and 8S. Given the pricing, most carriers would have picked HTC's devices over Nokia's. Even though Nokia may have offered its devices to carriers at a lower price than those quoted above, it is unlikely to be below what HTC had offered. In order for Nokia's devices to be competitive, the subsidized prices would have to be on par with other WP8 devices on the market, thereby giving the carriers a greater subsidy burden. Carriers have been rooting for a third platform to give them a bargaining chip to reduce subsidies on other devices, so this would defeat the whole purpose and put a strain on Nokia's already weakened carrier relationships.
Apart from carrier hesitance, what impact could this pricing strategy have? To explain this, we need to take a look at the Lumia's shipment & average selling price (ASP) figures over the last couple of quarters:
While shipments had doubled for various reasons, the average selling price of Lumia models fell from €220 to €186 and should fall even further in Q3. Even an average of €200 is far below the prices specified above and the launch prices of other major Lumia models. The only explanations are that the Lumia sales mix is skewed towards lower end devices or that Nokia has had to continually cut prices to get rid of unsold inventory. Given Nokia's limited presence in the low-end market with Lumia devices, I'd say the latter is more likely.
Even though the Lumia 800 & Lumia 900 had received extremely positive reviews when they launched, they did nothing to lift Lumia's ASP. My guess is that Nokia is hoping the Lumia 920 & 820 can do what the previous models didn't and help boost ASP. Nokia is attempting to boost its sales mix and benchmark itself against the Galaxy S3 and the iPhone. Unfortunately, its brand is nowhere near as strong anymore, especially in the high-end smartphone market. The Lumia 920 will probably give Nokia a temporary ASP boost on launch, followed by another decline driven by inventory concerns.
