'Competitively priced'

Microsoft hopes the Zune, which will also be able to play videos and includes a radio, will eat into the iPod's more than 75% share of the digital music player market in the US.

The Washington-based software giant said it will also introduce a competitor to Apple's iTunes music library and online store called Zune Marketplace.

This online store will allow users to choose to buy songs individually, or alternatively sign up to a subscription service to download a certain number of songs for a flat fee.

The initial Zune will have a 30-gigabyte memory, but Microsoft said it could not yet provide an exact release date or price for the product, only that it would be priced "competitively" with rivals.

"The digital music entertainment revolution is just beginning," said J Allard, a Microsoft vice president of design and development, who is in charge of the Zune line of products.