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Thursday, September 28, 2006, 07:00 am PT (10:00 am ET)

Microsoft says Zune to sell for $249

Microsoft Corp said Thursday its Zune digital media player will be sold at relatively the same price as Apple Computer's new 30GB video-enabled iPod and admitted that it will lose money on each sale as a result.

The Zune, which also comes with 30GB of storage, will retail for $249.99 (about 99 cents more than the iPod) when it goes on sale Nov. 14. Songs available for download at the Zune Marketplace service will cost about 99 cents a song, on par with prices at Apple's iTunes, Microsoft told Reuters.

The Redmond, Wash.-based software maker also told the media outlet that it needed to put a comparable price on Zune, even if it meant suffering a loss from the device's sales this holiday season.

"We had to look at what was in the market and offer a competitive price," said Scott Erickson, Microsoft's senior director of product marketing for Zune. "We're not going to be profitable this holiday but the Zune project is a multiyear strategy."

Microsoft has said it plans to spend hundreds of millions of dollars over the course of the next several years in a bid to catch Apple's iPod.

The Zune player is the first step in creating a new brand of portable devices, the company has said, adding that a Zune phone is also in the works.