Microsoft cuts Zune price as Apple ups iPod ante

On the day Apple revealed its first WiFi-enabled, touchscreen iPod, Microsoft’s rival to Apple’s wildly popular multimedia player got a little less expensive.

The Zune device from Microsoft now costs $199, $50 less than its original price tag. Microsoft announced the price cut on its Zune Insider blog on Tuesday, a day before Apple was rumored to be introducing new iPod models at an event in San Francisco, which the company did indeed do.

Naturally, Microsoft did not mention Zune’s arch rival in its blog post, saying that the price cut had been in the works for some time.

“It’s part of the normal product lifecycle, something we’ve had on the books for months,” according to the blog post. “We just got some research back and customer satisfaction with the 30GB device is really high (around 94 percent) and we expect even more consumers will now want to discover the Zune experience at the new lower price.”

With the new iPods introduced by Apple CEO Steve Jobs in San Francisco on Wednesday, that prediction doesn’t seem too likely. The new iPod touch that Jobs unveiled is the first iPod with Wi-Fi capability, one of the differentiators between the current iPod lines and the Zune device, which was launched with Wi-Fi last November. iPod touch also is similar in look and feel to the recently launched iPhone, and features touchscreen controls that are making Apple’s phone/multimedia device combination a hit with customers.

In other bad news for Zune, Apple on Wednesday also has cut the price on its 80GB iPod from $349 to $249, which makes it only a fraction less expensive than the 30GB Zune. It also has introduced a 160GB iPod for $349. According to Jobs, Apple has sold 110 million iPods to date.

There are rumors that, to compete more aggressively with Apple, Microsoft will introduce new Zune devices by the holidays with new features and form factors, but so far the company has declined to divulge specific details. There have also been hints from executives that an iPhone rival is in the works. Microsoft has said from the beginning that Zune is a long-term investment, and expects it will take some time before the device will be a worthy competitor to iPod, which has a five-year headstart and Apple’s brand power behind it.

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