Crunchgear broke the news earlier this week — Amazon is set to announce a new Kindle format tomorrow. But this new Kindle isn’t going to replace the Kindle 2. The new Kindle is larger than its cousin. Ideally, the large format will make it easier to read electronic newspapers and magazines.

Engadget snagged some covert photos of what appears to be a run-through of the presentation that will take place on Wednesday. The new Kindle, dubbed the Kindle DX according to Nilay Patel of Engadget, looks like a larger version of the old Kindle — black and white screen included. Patel says that the DX’s screen will measure 9.7 inches (about 24.6 centimeters). The earlier versions of the Kindle have a six-inch screen (15.2 centimeters). It will also have one other new feature: Patel says that the new Kindle will have a built-in PDF reader functionality.

Earlier this week, The New York Times ran a story by Brad Stone about e-book readers and the newspaper industry. It’s no secret that newspapers are in a lot of trouble. Production and distribution costs are up while subscriptions are dropping. An electronic distribution model could potentially  save hundreds of millions of dollars per year for a large paper like The New York Times. According to Engadget, representatives from The New York Times will appear with Amazon tomorrow to announce a special subscription price for electronic paper subscribers: $9.95 per month. The normal subscription rate is $13.99 per month.

Is that enough to lure people to the new Kindle? I’m not sure. There’s no word how expensive the new device will be. The Kindle 2 sells for more than $350, making it a luxury item. Are consumers willing to shell out a few hundred dollars for something that has limited functionality? Or will they purchase a netbook, which arguably is a better value since it can do more than the Kindle?

I think there are two potential markets for the new Kindle: traditional readers and college students. An informal poll conducted by CNET found that 70 percent of the people who bought a Kindle were 40 or older. These are people with more discretionary income. They are also more likely to read traditional newspapers or magazines. I talked about this recently on an episode of TechVi with Randall Bennett and Jeff Bordeaux. And if Amazon lands some deals with textbook publishers, the new Kindle could be a huge success in the college market. Students could carry a single device and store every book they’d need during their college careers on it. But to be successful, Amazon needs to do two things: lower the price of the Kindle and convince the textbook publishers to offer electronic books at a discount. It’s hard to convince a consumer that you should pay the same amount for an electronic file as you would for a physical book.

What do you think? Is the new Kindle a good idea, or will it be a flop?

While you ponder that question, learn more at HowStuffWorks.com:

How Amazon Works
How the Amazon Kindle Works
How Electronic Ink Works