Even if you’re as dubious as I am about the new Apple iPad competing seriously with the Kindle for the e-Reader spotlight, there’s little questioning that their share of the market stands to fall off a bit in the coming months and years. The sheer number of new devices available now is bound to dilute their dominance, especially when people start trying to make the apples to oranges comparison of a catch-all tablet PC with a dedicated e-Reader.

Amazon is a big company full of smart folks though, so they’re not going to take this lying down. Probably the most obvious response is the “If you can’t beat em, join em” tactic. The rumors of a new Kindle Touch seem to imply that they’re steering in that direction, at least in part. Releasing a new, premium Kindle with a bunch of fancy bells and whistles just makes sense. After all, it was our No. 1 Kindle prediction for 2010.

There is another angle to it that hasn’t been explored, and that’s offering a lower-budget version of the Kindle to get people hooked on buying eBooks. According to reports by TechCrunch, however, Amazon is prepared to take it even farther than that. Apparently, long-time Amazon customers and bibliophiles started getting promotional emails back in January, just before Apple’s big flop of an event, offering them a money-back guarantee for those who ordered a new Kindle 2 and didn’t like it. If they purchased the device and reported that they weren’t satisfied, Amazon was prepared to let them keep the Kindle for free.

While it seemed like a good one-off deal at the time meant to sway people who might be intrigued by the iPad, TechCrunch is now citing a source that says free Kindles could be the way of the future. The report says that they’re trying to find a way to cut costs to the point where they can offer a free Kindle to every Amazon Prime subscriber.

For those not in the know, Amazon Prime is a subscription service offered by Amazon where you pay a yearly fee of $79 and in exchange get free two-day shipping for the whole year as well as overnight shipping for the heavily-discounted price of $3.99. It’s a brilliant sell, because once you have that free two-day shipping going, it becomes difficult to buy products online anywhere else. Consequently, Amazon Prime subscribers become some of their most loyal customers. Give these people a few Kindles, the thinking goes, and they’re bound to happily spend away, more than making up for the cost of the device in word-of-mouth advertising and the sheer volume of books purchased.

Of course, this all hinges on Amazon being able to reduce their costs to the point where they’re not taking huge losses by giving Kindles away. I suspect, and this is purely conjecture at this point, that this is going to come to fruition at the same time as the launch of the rumored Kindle Touch. Amazon can start handing out the Kindle 2 for free to Amazon Prime subscribers and avoid cannibalizing their own market share by releasing a fancier touch-enabled Kindle to fill its place in the premium-priced niche. Everybody wins, from the budget-conscious to the gadget freaks.

The question remains: should you hold off buying a Kindle now so you can get in on this sweet deal? I don’t think we’re quite at that point yet. This is still all shrouded in rumor, and the earliest something like this is liable to happen is the holiday season at the end of the year. The degree to which the Kindle can improve your reading habits today more than justifies the cost. And would you really deny yourself that satisfaction? I wouldn’t either.

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