A $199 Nook Tablet takes aim at Amazon’s Kindle Fire

Recent rumors of a lower-priced Nook Tablet(s bks) have turned into reality as Barnes & Noble announced a $199 tablet on Tuesday. The lower-priced model is nearly identical to the current $249 Nook Tablet; the only differences are internal as the slate has half of the memory and storage of the current model. Barnes & Noble also dropped the price of its Nook Color from $199 to $169.

The $199 Nook Tablet comes with 8 GB of storage capacity and 512 MB of RAM; both of which are half that of the $249 model. However, the cheaper tablet retains the same display, processor and quoted 11.5 hour battery life. Clearly, this less expensive version is Barnes & Noble’s way of competing against its primary competition: Amazon’s Kindle Fire(s amzn), which is also priced at $199.

Thanks to low prices, the Nook and Kindle Fire accounted for a whopping 21 percent of the overall tablet market in the final quarter of 2011. But Amazon took two-thirds of that 21 percent, meaning Kindle Fires outsold Nook Tablets by a margin of 2 to 1. The $199 price-tag of the Fire may have contributed as Amazon offered a lower-priced device, but that’s not the whole story.

Even at the same $199 price, Amazon’s Kindle Fire is still likely to outsell the Nook Tablet because Amazon offers a stronger ecosystem. Both slates have curated app stores and their own virtual shelves of digital books and magazines, but Amazon also has a store for digital music and videos. Barnes & Noble is completely reliant upon third-party services such as Netflix, Hulu Plus, Flixster, Pandora, Rhapsody, Grooveshark and MOG.┬áPlus, the Kindle Fire is a window to the endless mall of physical goods that Amazon sells.

The Nook Tablet is a great device — see my review here — and at $199 will surely get more looks from consumers, especially those that prefer the overall hardware. But for now, the Nook Tablet needs more than a price cut to heat up the competition because price alone isn’t good enough to become a leader in today’s tablet market.