Microsoft Announces Third Generation Zune

Spurred by product leaks, Microsoft on Monday announced details about its third-generation Zune digital media platform. The announcement came a day before Apple reveals upgrades to its market-leading iPod and iTunes products.

"With the combination of subscription, wireless access to millions of tracks, and powerful discovery features like personal recommendations and the ability to buy music from FM radio, Zune is taking the digital music experience to the next level," said Zune general manager Chris Stephenson.

This time around, Microsoft isn't dramatically changing the Zune hardware as they did a year earlier. Instead, the company is bumping storage capacities for both its flash- and hard drive-based Zunes and is adding some new color schemes. Beginning September 16, the company will sell flash-based Zunes with 4 GB ($129), 8 GB ($149), and 16 GB ($199) capacities, and hard drive-based units with 80 GB ($229) and 120 GB ($249) of storage. Versions will be available in the current range of colors plus a new blue-on-silver scheme and a sleek all-black color scheme.

From a functional standpoint, a free update to the Zune player's software will add Buy from FM, a way to purchase music you hear on the device's built-in FM radio; direct access to the Zune Marketplace from Zune devices when connected to a Wi-Fi network; and, for Zune Pass subscribers, the ability to stream music over the Internet to their devices. Microsoft is also adding support for games and Audible audio books. The company will ship two free Zune games, Hexic and Texas Hold 'Em, with the latest software update.

On the desktop, the Zune PC software picks up a number of new features as well. Via a new Channels feature, Zune users can explore musical channels created by music experts, celebrities, and music charts, and Zune Pass subscribers can automatically sync these playlists to their devices. A new Personal Picks feature will make musical recommendations based on the music they listen to and enjoy. A new Now Playing view is more interactive and cinematic.

While the Zune debuted with much fanfare in late 2006, it has yet to generate much in the way of sales. Microsoft has sold over 2 million Zune devices in that time, but market leader Apple sold over 11 million iPods in the most recent quarter alone. Zune is currently third from a market share perspective behind Apple and SanDisk.

As always, Microsoft is pushing the Zune's community-based advantages over the iPod with this latest round of updates. The Zune's social aspects include a Web service for sharing musical preferences and device-to-device sharing capabilities.