Zune is Microsoft's first attemp to crack the MP3 player market on its own

The firm will sell songs from a planned online music store for 99 cents each and will also offer a $14.99 a month subscription service.

"It's not going to be price that really drives people to Zune," said Jupiter analyst Michael Gartenberg.

Microsoft hopes the player's features such as the ability to share music over wi-fi will be its unique selling point.

The wireless technology lets Zune owners share music for a limited number of days - three times over three days - and then they can decide whether or not to buy the music.

Mr Gartenberg said Jupiter research had shown that only about 11% of consumers are interested in sharing music device-to-device.

Zune owners will not be able to buy and download music directly on to the player - they will need to download tracks to a PC and transfer to the device.

Zune hopes to steal market share from Apple's iPod

Scott Erickson, senior director of Zune product management, said: "In total we won't be making a profit this year, but we will, of course, work toward becoming a profitable business in the future."

Many analysts believe Microsoft is prepared to make a loss to drive the business, much as it did with the Xbox console.

Microsoft is hoping features such as a built-in FM radio and a music subscription service - offering two million songs to the listener for a monthly fee - will differentiate the device from the iPod.

Like the iPod, the Zune will also be able to play video and will come pre-installed with some music videos.

The Zune has a 30GB hard drive, enough to hold about 5,000 songs, depending on their file size and quality.

Apple currently has about half of the global market for MP3 player sales.

Microsoft has not announced a release date or pricing for the Zune outside of the US.