Microsoft matches Apple with Zune pricing

Microsoft is to retail Zune, its first digital music player, at the same price as feature-equivalent iPods.

Microsoft today reveal a 30Gb Zune device will be priced $249.99 compared to a 30Gb iPod that is priced $249.00. Songs for Microsoft's player will start at just under a dollar - just like individual tracks on iTunes.

The only difference is you must use special Microsoft credits instead of actual money to purchase songs. Credits come in units of 80 that cost $1 and in a stroke of marketing genius one track will cost 79 credits. The alternative is to pay a $14.99 monthly subscription to the Zune service, which Microsoft promised will hold "millions" of songs.

Consumers will be invited to shell out between $19.99 and $99.99 for Zune accessories like AV cables and adaptors, cradles, dock, bags and "special" headphones.

Having matched Apple, Microsoft will make a loss on each Zune player sold. This is not the first time it has taken a loss on hardware -just ask the Xbox division.

Scott Erickson, who heads up Zune product marketing, justified the price by telling Reuters that Microsoft "needed to put a comparable price on Zune, even if it meant that the company will suffer a loss from the devices this holiday season."

With identical pricing, storage and video capabilities, Microsoft is gambling on Zune's ability to share music over a wireless connection to get an edge on Apple. Microsoft's price announcement came with the promise Zune is "putting the social into digital media."

If this is the sharing age, though, then the Zune makes Microsoft look like the Grinch. Zune users will get just three days in which to listen to other users' songs up to three times - that's it. Neither, will Zune play Microsoft-protected Windows Media audio or video purchased or rented from Napster, Rhapsody, Yahoo! and other online media services.

With a November 14 launch planned, Microsoft should be able to say it got a consumer product out in time for the Holidays.®