Barnes and Noble's new e-reader sets its sights on Amazon's Kindle

Real competition is emerging for Amazon's (AMZN) Kindle. A few days ago, bookseller Barnes & Noble (BKS) announced a deal with Plastic Logic to supply a Kindle-like reader. B&N's catalog of 700,000 titles, twice that available for the Kindle, should be a major attraction for consumers, as should the new device's cell-network based Internet connectivity, which will be provided through AT&T (T).

Barnes & Noble's device will apparently work much like the Kindle, which uses the Sprint network. Users will be able to download reading material anywhere within the AT&T network, including its Wi-Fi network in locations such as Starbucks (SBUX). Amazon bundles the cost of the Sprint (S) connectivity into the price of the device and books purchased. It seems likely that B&N will do the same.
The new e-reader is closer in size to the large-screen Kindle DX than the Kindle 2, which will make it much friendlier for newspaper and magazine content. Further, unlike Amazon -- which uses a proprietary format -- B&N has been a supporter of the open ePub standard, which should further extend the options available to the company's customers.

DailyFinance's Douglas A. McIntyre recently wrote about Google's (GOOG) plans to establish its own untethered e-book store, which would allow content providers to set their own prices. This could also be a major market changer -- and a serious threat to Amazon. For the time being, however, Barnes & Noble's announcement firmly establishes the template for the near future of e-readers: book vendor + device +wireless content delivery service. So far, the major players are:

* Amazon books + Amazon (Kindle) + Sprint

* Barnes & Noble + Plastic Logic + AT&T

A third competitor, Sony (SNE), is still missing a leg:

* Sony e-book Store and Google books + Sony Reader + ???

The lack of wireless connectivity will be a severe handicap for Sony, as its e-reader is comparably priced to the Kindle, yet offers less functionality. If it hopes to survive, Sony will have to add this feature to its next generation of readers.

The US trade wholesale e-book sales jumped by an astonishing 53 percent between the fourth quarter of 2008 and the first quarter of this year, according to the International Digital Publishing Forum. With these kinds of profits on the table, it is only a matter of time before more competitors will join the e-scrum.

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