The Zune's price will put it in direct competition with Apple Computer's latest 30GB iPod, which also costs $249.
To introduce the companion Zune Pass music service, the device will come preloaded with songs, music videos and film shorts from the store. A Zune Pass will cost $14.99 a month, or $44.97 for three months.
"It's clear that we are not going to see a pricing war at this predictable moment. They are not going to undercut Apple's prices. But given the lack of volume discount and the screen size and the Wi-Fi capability included on it, $249 is still an aggressive price point," said Michael Gartenberg, research director at JupiterResearch.
There will also be the option of purchasing individual songs through a system called Microsoft Points. The new Microsoft cash system will work by adding money to an account, as with a prepaid phone card. Points will then be deducted from the account with each purchase. A single song will cost 79 points, "the equivalent of 99 cents," according to Microsoft spokeswoman Kyrsa Dixon.
The point system is already used in the Xbox Live Marketplace, and Microsoft plans to host other online stores where Microsoft points can be redeemed, according to Katy Gentes, product marketing manager for Zune. In the United States, points are available in denominations of $5 for 400 points, $15 for 1,200, $25 for 2,000 and $50 for 4,000. That makes $1 worth about 80 points.
Gentes said this system will enable Microsoft to sell retail gift cards of Microsoft points that could then be split over different Microsoft online stores. It will also act as a common global currency for Microsoft products, according to Gentes.
Microsoft said Zune software will play files in several popular formats, including the AAC format used by Apple's iTunes software.
"Zune software can automatically import your existing music, pictures and videos from iTunes and Windows Media Player in a variety of formats, including your existing playlists and song ratings, as permitted by the online service from which it was purchased," Microsoft said in a statement, clarifying in a footnote that the music files must be "in unprotected WMA, MP3, AAC (formats); photos in JPEG; and videos in WMV, MPEG-4, H.264."
That means that although songs purchased from the iTunes Store are barred by digital rights management (DRM) restrictions from being moved, songs that were originally ripped from a CD and uploaded to a computer with iTunes software may be able to be copied onto the Zune.
Apple did not immediately respond to a request for comment.
"What we tried to do is recognize that consumers have a lot of files that might not be WMA. They have MP3 or AACs because they may have ripped CDs into those files. We want to make it easy for them to bring them into the Zune, if they have the rights. And we just import them as AAC (or MP3) files. They don't change. We are supporting all those different formats and codecs," Gentes said.
"The real magic would have been if they had a way of importing protected AAC files, and people could make the transition," JupiterResearch's Gartenberg's said. "It won't work with purchased music from Urge or Rhapsody or Napster, for example. It's interesting, but it's not really a game changer, one way or the other, and not something that I think will drive iPod users over to the platform."
As previously reported, the Zune will come in black, brown and white. It will have wireless capability that lets people share music, playlists and photos from one Zune to another, and it will feature an FM tuner and a 3-inch LCD screen. The Zune will hold 7,500 songs, 25,000 pictures or 100 hours of video, and it will come with a set of earphones, as well as a sync cable and a device sleeve.
Microsoft also released details on Thursday on the Zune's three accessory kits.
The $99 Zune home pack hooks the device into one's entertainment system. It includes an A/V output cable, a Zune dock, a wireless remote, a Zune sync cable and an AC adapter. The $99 Zune Travel Pack includes earphones, a Zune dual-connect remote, a gear bag, a sync cable and an AC adapter. For a car, there is $79 kit that comes with a charger and an FM Tuner with AutoSeek.
All of the accessories from the kits will also be sold individually as well. The cables are each priced at about $20. The AC adapter, gear bag, wireless dock remote and wireless dual-connect remote sell for $30 each. The dock and earphones cost $40 each, while the car charger costs $25, and the FM Tuner with AutoSeek costs $69.
All of this means that Microsoft's marketing department has its work cut out for it, Gartenberg said.
"At the end of the day, it's not going to be price that drives people to Zune," he said. "It's going to be feature set versus feature set, and form factor versus form factor, and the ability for Microsoft to start marketing this to win the hearts and minds of consumers."
