In July, the company gave a sneak preview of the device, but its potential draw is now becoming clear: Zune will be not only an MP3 player and a FM radio, but also a social device that can beam music and playlists to other nearby Zunes.
The recipient of a shared song will have three plays over three days to play any shared song, and then they'll have to buy it. The Zune will be able to detect other nearby Zunes, making it a social gadget. That's the big feature that differentiates the Zune from the iPod, CBS News correspondent Anthony Mason reports.
Microsoft is expected to launch the player before the winter holidays. It is slated to be available in white, black and chocolate brown.
Brown? Microsoft's design director for the project, Steve Kaneko, explained the shape and scheme is "to make it less cool and sleek, but actually warm and silky."
"Who in their right mind would … create a brown technology product? Artists will. Musicians would. And Zune will," Kaneko said.
The roughly iPod-sized device has a larger, three-inch screen, Mason reports, and will come stocked with full-length sample tracks and other content.
What about an iTunes rival? Microsoft may have that covered, too. "Zune Marketplace," as it is currently dubbed, is preparing to sell music tracks and albums — and eventually is rumored to be adding shows and videos to the offerings.
The company also announced several gadgets that will work with the device, so Zune users can listen to music in the car, at home or on the road. It did not say how much the gadgets would cost.
Jupiter analyst Michael Gartenberg, one of a handful of industry analysts briefed on the project, said Microsoft probably feels like it has to get into the portable player market because it is such an important jumping-off point for getting people to embrace its technologies in the living room.
As Mason reports, Microsoft is not claiming at the moment that it has a target market share to go after.
Robbie Bach, president of the entertainment devices division of Microsoft, said the appeal of Zune is simple — and has little to do with the elite, isolationist iPod culture.
"Actually, I think its something quite different," Bach said. "We're trying to create a social experience, the idea that people can share their music. The iPod is something that's very much about an individual. It's a very solitary experience — and when you look at the generation in the marketplace today, they're a very social group."
Offering the hardware and software together could put Microsoft in a more competitive position, says CBS News tech analyst Larry Magid.
But in creating its own music products, Microsoft also risks alienating partners such as Creative Technology Ltd. and Samsung, Gartenberg said. Those companies are already using Microsoft's software for their own players, although they've had little success against Apple's juggernaut.
"This is a very tough message," Gartenberg said. "If you're the head of Creative, as of this afternoon you're not just facing Apple, which was bad enough; you're now facing your partner."
Microsoft announced the Zune along with other gadgets, including a wireless keyboard designed to tie in with the upcoming Windows Vista operating system.
Another new gadget is the four-in-one Wireless Notebook Presenter Mouse 8000. It can be used as a mouse, a slide presenter, a laser pointer and a media remote. It comes out next month and will br priced at about $100.