By Jessica Shambora
July 29, 2010

The market leading e-reader gets refreshed with a Wi-Fi only option and a zippier screen.

Amazon today introduced a new version of the Kindle eReader — Kindle 3 — that shows it’s not backing down from selling dedicated electronic reading devices.

The new Kindle, code-named Shasta, doesn’t have a color display or a touch screen, both long-rumored to be in the works, but it is smaller and lighter, and has a longer battery life than the previous model.  Since these are the Kindle’s key advantages versus Apple’s (AAPL) iPad, the improvements further distinguish the two rival devices.

The new Kindle’s six-inch screen is the same size as

the previous version, but the body is 21% smaller, making it small enough to slip into the pocket of a suit jacket. It’s also 15% lighter, weighing in at just 8.7 ounces compared the hefty 1.5 pounds of the iPad Wi-Fi model. That’s crucial considering that users often hold their eReaders with one hand while riding the subway or lying in bed.

The battery life of the new Kindle is also improved, lasting up to one month with the wireless turned off or 10 days with it turned on, reducing the hassle of frequent charging required by devices like the iPad.  And with storage expanded to hold 3,500 books, most users can carry their entire library with them.

The screen contrast on the electronic ink display has also been improved, while the 20% faster page turning should silence any remaining critics who complain about lag times.

Take your Wi-Fi with or without 3G

The next generation Kindle still offers free unlimited wireless 3G service (plus built in Wi-Fi), unlike the data plans for the iPad 3G, which run $15 or $25 per month, with a ceiling on how much you can download. (The iPad, of course, can access a far wider array of data-intensive content.)

Amazon (GOOG) has also held the price for the new Kindle at $189. Since this new price was announced in June for the existing model, down from $259, the growth rate of sales of the device have tripled, says Amazon. (The iPad starts at $499.)

Amazon is also introducing a Wi-Fi only version of the Kindle for $139 and offering free access at AT&T (T) hotspots in the U.S. Both new models will begin shipping August 27.

Forrester estimates that the Kindle comprised two-thirds of the 3.7 million eReaders in the U.S. market at the start of this year. That’s not likely to change soon: Of the nearly 20% of US adults surveyed online who are considering buying an eReader, 69% are leaning towards the Kindle, though the report notes that figure will surely be eroded by tablets like the smash-hit iPad.

While the iPad and its ilk may pose a threat to eReaders, there’s still plenty of market to share. Forrester predicts 29.4 million US consumers will own eReaders by 2015.

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Sales of Kindle books, meanwhile, have surpassed those of hardcover books: Amazon announced last week that it sells 180 Kindle books for every 100 hardcovers. Skeptics point out that hardcovers account for only 23% of physical books sold, according to Nielsen, with paperbacks making up the majority.

But consider this: Kindle owners buy more than three times as many digital books as the number of physical books they bought before owning the device. And Amazon’s 630,000 books available at the Kindle store certainly tips the scales for serious readers contemplating the iPad’s 60,000 titles.

(Yesterday Amazon announced that it has sold more than one million Kindle books by Stieg Larsson, the author of The Girl with the Dragon Tattoo, part of the Millennium Trilogy — which is not available on the iBookstore.)

The new Kindle is premised on the same proposition as the old: that demand for more affordable dedicated devices still exists.

For evidence, look no further than Apple’s iPod. It shoots video, but the main draw is still music. And even with the launch of the iPad, the growth of the iPhone, and near saturation of the market for mp3 players, Apple sold 9.41 million iPods last quarter.

“It’s like running shoes,” says Russ Grandinetti, Amazon’s VP of Kindle content. “If I’m going five miles, I put on a pair that are designed for running and will be supportive, not my Chucks.”

Yet like Chuck Taylor sneakers, the new Kindle will continue to occupy a low price point and trade on a sort of timeless style and categorical rejection of bells and whistles. Jeff Bezos can only hope his product also matches Converse’s for longevity and sales.

What’s new about the new Kindle 3:

  • 21% smaller with same 6-inch screen as previous model
  • 15% lighter than previous model (8.7 ounces vs. 10.2 ounces)
  • Electronic-ink screen has 50% better contrast than any other eReader
  • 20% faster page turns than previous model, with improved fonts
  • Battery lasts up to one month with wireless off, compared to two weeks for previous model
  • Stores 3,500 books, double that of previous model
  • Built in Wi-Fi
  • Graphite color option
  • Easier to grip surface
  • Newly designed buttons and button layout
  • Quieter page turn buttons
  • Improved PDF reader
  • Text-to-speech enabled menus
  • New leather cover available, featuring a retractable reading light, powered by the Kindle

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