Spotted at Rupert Murdoch’s splashy digital newspaper launch on Wednesday: a prototype of Apple’s newest iPad.

A Reuters eyewitness saw what appeared to be a working model of the next iPad with a front-facing camera at the top edge of the glass screen at a press conference to mark the debut of News Corp’s Daily online paper in New York on Wednesday.

A source with knowledge of the device confirmed its existence, adding that the final release model could have other features. News Corp and Apple declined to comment.

The next version of Apple’s popular tablet computer is expected to be announced in the next few months.

Manufacturing sources have said it will sport two cameras — one in the front and one in the back — enabling users to make video calls.

News Corp Chairman Rupert Murdoch along with Apple executive Eddy Cue unveiled the Daily, a digital newspaper created from scratch for the iPad at a press conference in New York’s Solomon R. Guggenheim museum.

The Daily is Apple’s first foray into subscription sales through its iTunes store after having spent a year in talks with publishers with little progress.

The iPad was released in April 2010 and became one the hottest gadgets of the year.

The company sold 14.8 million iPads in 2010, and could double that this year, analysts estimated.

The 10-inch touchscreen device proved to be hugely popular as a media consumption device, good for games, video and Web browsing.

The iPad, which starts at $500, added more than $8 billion in sales for Apple last year and helped touch off a tablet-mania that is sweeping the technology business.

Nearly all of Apple’s rivals are working on tablets, with dozens of models expected to hit the market this year, providing the iPad with its first real competition.

Companies such as Samsung Electronics, Dell, Hewlett-Packard and Acer Inc are attacking the tablet market, with global sales expected to surge to more than 50 million units in 2011.