Nokia Lumia 1020: A tricky proposition

Nokia must sell the Lumia 1020 on its features, not its price. The smartphone maker is pushing the boundaries of innovation but will the slow take-up of the Windows Phone and a limited marketing budget be its undoing?

Graph for Nokia Lumia 1020: A tricky proposition

Nokia’s Lumia 1020 finally combines Microsoft’s Windows Phone 8 software with the 41MP over-sampling camera technology that the company previously marketed in the Symbian PureView 808. The combination sets a new benchmark for high-end smartphone engineering and is a timely reminder of Nokia’s R&D capabilities.

However, the company must still overcome incumbent rivals, slow adoption of Windows Phone, and a modest marketing budget if the Lumia 1020 is to help the company improve its financial performance.

Smartphone innovation not stagnant

At a time when macro-level innovation has seemed to be lacking in smartphones – due to the homogeneity of smartphone operating systems and the drive to appeal to the mass market – Nokia’s Lumia 1020 demonstrates that there is still considerable scope to drive forward the user experience in core smartphone capabilities.

This is evidenced not only in the Lumia 1020’s imaging prowess but also in its audio capabilities, with Nokia’s Rich Recording technology transforming the Lumia 1020’s audio recording.

Both imaging and audio are key areas of investment for Nokia and are crucial to its long-term strategy of rebuilding market differentiation. This is true not only at the high end, where the Lumia 1020 will be something of a beacon, but also further down the range as the fruits of Nokia’s labours begin to trickle down through the mid-range towards the value end of the smartphone spectrum.

The PureView 808 gave a tantalising view of what was possible in terms of phone imaging. However, the opportunity that it presented was squandered due to its outdated operating system and the fact that it was aesthetically compromised by a cumbersome – if impressive – camera module.

The Lumia 1020 addresses both these issues. While the new camera module contributes to a device that is noticeably thicker than the existing flagship, the Lumia 925, it is still small enough to avoid the chunky and top-heavy design of its PureView 808 forebear. The PureView user experience is similarly upgraded through its integration with Microsoft’s Windows Phone 8 platform, which itself benefits from a flagship device featuring category-leading imaging technology.

New belle at the smartphone ball

While the Lumia 1020 looks to be the new belle at the smartphone ball, its debut will not necessarily attract a mass of suitors. Most obviously, the device is necessarily expensive. Engineering of the kind on offer in the Lumia 1020 does not come cheap, as demonstrated by initial pricing of around $US300 on contract in the US and £599 when it launches SIM free in the UK in October. Aggressive operator subsidies would no doubt help in that regard, but might detract from the device’s premium engineering and user experience.

Furthermore, Nokia and Windows Phone still suffer from a lack of consumer awareness and marketing dollars compared with their key rivals – Apple, Samsung, and Android. While this situation is improving, these factors continue to put off many prospective consumers due to a greater chance of their favourite applications being unavailable.

As such, when lined up against rival devices such as Apple’s iPhone 5 and Samsung’s Galaxy S4, which now effectively sell themselves, the case for selecting the Lumia 1020 is less clear cut.

Nokia may still have work to do to convince prospective buyers to sacrifice their favourite apps for superior imaging. However, for those that are less concerned about specific third-party apps or in need of something different, the Lumia 1020’s pictures provide a compelling reason to look again to Nokia.

Tony Cripps is Ovum's devices and platforms principal analyst.