There surely can't be much doubt that the e-book reader market leader is the Amazon Kindle. The launch of the third generation Kindle reader has simply reaffirmed Amazon's market leadership. It’s interesting to note that the only serious competition which the Kindle has seen to date comes in the form of a multi-functional tablet computer which costs three and a half times the price of the Kindle – Apple’s iPad.

However, even the iPad’s appearance on the scene doesn’t seem to have had any major impact on demand for Kindle readers. Since it was unveiled at the end of July, the new and upgraded Kindle 3 has been flying off the shelves. The new Kindle is selling faster than any earlier Kindle reader did in the equivalent post launch period.

One very significant advantage which Amazon has over its competitors – including Apple's iPad – is the enormous library of Kindle books which customers can choose from. There are more than 670,00 titles available on Amazon’s Kindle store at the moment – and that number is increasing every day. There are also a further 1.8 million books which are out of copyright and which Kindle users can download for free!

As well as making the Kindle reader a more attractive choice for potential customers, this enormous collection of e-books means that Amazon can operate with a slightly lower retail price for their e-book reader hardware based on the perfectly reasonable assumption that customers will be buying Kindle books over the lifetime of their reader. For Amazon, it’s a significant competitive edge over their competitors.

The manner in which Amazon expect the e-book market to develop is clearly shown by the fact that they are making free apps available which allow users to download and read Kindle books on a variety of personal electronic devices. They obviously anticipate that, in the fairly near future, e-book sales will be assume more importance than the sales of e-book reader hardware. So far, this has been a successful strategy for them. At the moment, they are estimated to have a 60% to 80% share of the USA's e-book market (depending upon which estimate you believe) and somewhere in the region of 20% of all Kindle book sales are intended to be read on non-Kindle devices.

Bearing in mind the downward price trend of e-book reader hardware in general, and the Kindle reader in particular, you have to wonder whether we could even see Amazon giving Kindle readers away for free in the not so distant future. Of course, it would probably be a gift that came with some strings attached. Members of Amazon Prime (Amazon’s premium express delivery service) could perhaps qualify. Perhaps they could launch some kind of e-book club where a commitment to buying a certain number of books in a given period of time would qualify members for a free Kindle - a sort of digital book of the month club. There are a variety of options which could, conceivably, make this a viable business model for Amazon assuming that e-book reader prices continue to fall.

The simple fact that this option is achievable for Amazon, but not for the vast majority of their competition, must make it a scenario which they will need to give serious consideration to. It is certainly not beyond the realms of possibility.