Not solely. But a smartphone today is a multi function device. That means each function needs to meet a minimum standard for the device to be acceptable.
The camera is so terrible it doesn't meet the minimum requirement for a smart phone today. Not for a camera. If you want a good camera phone, then you're a lot more limited. I'm talking just for talking a few pictures here and there like every dumb and smart phone user does. There old Nokia flip phones with better camera than the nexus.
And what other merits does it have that the regular user cares about ? All the merits of the nexus is things only geeks care about. People who also generally want stuff like a decent camera more than the average person. Even then. The ability to install the latest "clean" android OS isn't that gig of a merit anyway. And since those that actually care about that are geeks, they can do the same on pretty much every other android phone anyway.
Meaning they can cen a phone that is overall better in every way than the nexus, for the same or lower price.
Nexus phones are marketed mainly at developers, they aren't really being pushed into the mainstream. Cutbacks are made in areas that aren't so important for developers to keep the phones at a reasonable cost.