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Barnes & Noble is launching a new $199 8GB Nook Tablet to better compete against Amazon’s popular Kindle Fire Tablet, the company confirmed today.

Since the Kindle Fire’s November launch at a mere $199, the $249 Nook Tablet has had a hard time attracting customers who were in the market to buy the cheapest tablet, as my colleague Sean Ludwig previously pointed out. The Nook Color is also dropping to $169, which makes it the cheapest available tablet option for most people.

Unlike the current 16GB Nook Tablet model, the new $199 Nook Tablet will have only 8GB storage, which makes sense since plenty of digital media (e-books, e-magazines, games, music, and other media) is increasingly moving to the cloud. The new Nook Tablet still has a microSD slot for expanding its storage (it can take up a 32GB microSD card).

I’m guessing that since Barnes & Noble is reporting fourth quarter revenue increases for both digital and physical sides of the business, the company is seeking to continue its strategy of making the Nook a loss leader to boost sales everywhere else.

Nook Tablet photo: Barnes & Noble

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