Amazon.com's announcement late Wednesday that it will launch a new version of its Kindle e-book reader in August could further stoke a price battle between major players in the e-reader market.

E-book reader prices have been slowly falling for months but price cuts began to gain pace since late June, when Barnes & Noble cut the price of its Nook reader and introduced a new model at US$149.

The price made it the cheapest e-book reader from a major retailer. It still holds that distinction today, but might not hold it much longer.

Amazon.com's third-generation Kindle will come in two models, one with 3G wireless and one without, and the cheaper of the two will cost $139 when it goes on sale on Aug. 27.

It's an impressive price decline for the Kindle, the cheapest model of which cost $259 in the middle of June. In late August, barely two months later, the Kindle entry point will have dropped by almost half.

"At that price it's now almost an impulse buy for some consumers," said Tim Renowden, an analyst at Ovum in London. He said he wouldn't be surprised if Barnes & Noble further cut the price of the Nook, but that the competition would most be felt by lesser-known brands.

Many of these companies have used price as a key selling point, but with the Kindle so cheap it will be hard to compete when Amazon.com offers additional benefits, such as tight integration with its online store and a huge library of books.

The lower price also increases the gap between e-readers and a slew of tablet PCs that are now coming to market. Led by Apple's iPad and including several promised machines based on Google's Android OS, the tablets offer many more functions than e-readers but are heavier, have much shorter battery life and are typically more difficult to read for long periods of time.

Amazon.com is banking on the lower price translating into more sales, and there is evidence that could already be happening.

The Kindle had already become the best-selling item on Amazon.com for two years running and last week the company said it had "reached a tipping point with the new price of Kindle."

"We're seeing very, very strong [Kindle] device growth and we're seeing very, very strong content growth," Thomas Szkutak, Amazon.com's chief financial officer, told investors during a conference call.

On Wednesday Amazon said it had sold out of the $189 model.

But the company has to date been cagey on just how well the Kindle has been selling and hasn't released detailed sales figures.

Martyn Williams covers Japan and general technology breaking news for The IDG News Service. Follow Martyn on Twitter at @martyn_williams. Martyn's e-mail address is martyn_williams@idg.com