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E-Reader Price War: How Low Can It Go?

Amazon's Kindle

Amazon's (AMZN) Kindle was one of the first e-readers to catch on in the market back in 2007. Spearheading the e-reader trend gave Amazon some pricing power, but as new devices roll out it has been forced to play the pricing game.

Only hours after Barnes & Noble slashed the price on its Nook, Amazon said it would reduce the price of the Kindle by $70 to $189. Then at the end of July, Amazon once again cut the price on its entry-level Kindle, introducing a new basic Wi-Fi-only model for just $139, which at the time made it the cheapest e-reader among major brands. Amazon also offers the Kindle DX for $379 from original price of $489.

In comparison, when the first Kindle debuted in 2007, it was priced at $399, and by last year dropped 35% to $259.

Amazon continues to remain mum on exactly how many e-readers it has sold, only saying it is in the millions. On Monday, the company said sales of its latest generation of Kindles has already outpaced total Kindle sales in the fourth quarter last year.

Analysts expect Amazon to sell between 5 million and 6 million units of the Kindle this year.

Amazon also revealed in its second quarter that sales of e-books outpaced that of hardcovers for the first time.

Forrester Research says Kindle holds about 60% of the U.S. e-reader market share. It also touts the largest e-book store.

In an effort to expand its reach, Amazon began selling the Kindle in Target (TGT) to reach a broader audience, and on Aug. 31 said Staples (SPLS) will also carry the device, and Best Buy (BBY) will stock Kindle on its shelves for the holiday season.

Amazon has also developed a Kindle application for the Droid, leaving some questioning if shoppers will purchase the device if they can get it on their mobile device.

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