After giving Apple's iPod a five year lead, Microsoft is finally set to officially launch its comeback response in the form of Zune. But is it too late to eat into Apple's market share? We spent a few hours with the device last week, here are our findings.

A digital music player at its heart, it contains a 30GB hard drive, a beautiful three inch screen, and an FM radio. It also can play videos and display photos. Part of this launch is also a software component called Zune and its Zune Marketplace. (confused yet?) Think of it similarly to iTunes and the iTunes Store, as a self contained one stop shop and organizer for your digital music content.

The device itself has some nice touches that help it shine above its competitors. Hearing all the complaints about iPod, Microsoft has decided not to go the shiny route that most everyone else has emulated. Instead, the Zune has what they call a "double shot" finish: A plastic solid color body, with a rubberized translucent exterior. This material will do well against scratches and scrapes (and if you believe the marketing hype will only look better with age). When we first saw a photograph of the brown model online, we were turned off, but in person, it's very alluring. The user interface itself is very slick. Three-dimensional transitions and flashiness on top of background images that you can customize, really sets itself apart from the others. Even the headphones were thought about, as they attach to each other by magnets to help prevent the dreaded cord tangle.

However, the functionality of the interface, doesn't live up to its competitors. It often felt like it took twice as many clicks to get to the music. The navigation buttons themselves, while simple when you've been using the device for a while, are difficult on first use. The circle at the bottom of Zune, is not the scroll wheel you are familiar with, but a directional pad with NESW access points. But its round design kept making us want to spin it like a scroll wheel. It's obvious from this design execution that they wanted to connect Zune to iPod, but it just seems silly to do this when the functionality isn't the same.

chriszune.jpgThe one thing that that Microsoft is trying to push the envelope with is the Zune's social sharing aspect. In fact, that's key to their marketing strategy of "Welcome to the Social." Each Zune device has an 802.11 wireless capability that will allow you to send a song to a friend (you can't, however, communicate with your computer through the wireless to sync). It can be a DRM (digital rights managed) file, a standard MP3, or a set of photos. (Videos aren't transferable at this time) You can transfer entire albums to your friends, or strangers you have just met with nothing more than two Zune's.

There is some down side to the sharing, though. While standard mp3's that you have been 'collecting' for years will play for ever, those DRM'd files that you have bought from the marketplace will only be allowed to remain playable for three times or for three days - whichever comes first. Once you have reached that limit for that particular song, you cannot get that song again from the same friend, you would need someone else to send it to you.

And on the subject of DRM in the time between iPod's launch and Zune, Microsoft helped competitors to iPod develop the Microsoft Play for Sure DRM. This system, would allow multiple devices to be compatible from multiple online music sources. Devices from companies like Toshiba, Creative, Samsung and content from places like Napster, Urge, and Musicmatch. However if you have any of this content, it wont work on Zune. For Zune, Microsoft decided to go for a closed format DRM so that they could, according to them, help control the quality of the content on the device, so that you could be sure that it would work. Basically, Microsoft now owns and operates two DRM technologies, neither of which is compatible with the other. This is funny, because Apple was given a lot of flack from Microsoft and others and still gets occasional jabs about having a closed format. But now Microsoft, as least with the Zune, seems to be all about closed format.

Disclaimer: We're Apple fans at heart. But that doesn't mean that we weren't excited by Zune. Sure, we naturally resist Microsoft whenever possible, but any challenge that might actually kick Apple to innovate again with iPod would be welcomed. It's just doubtful that the Zune is to be feared. Yes, it's a version one release, but they had years of experience to base it on. Its Zune software doesn't support common things like Podcasts, and although the screen is 3 inches vs the iPods 2.5, the resolution (320x240) is the same, so that just equals larger pixels. We really don't think that Zune is innovative enough to outseat the iPod in any way.

Bottom line: Nice try, Microsoft, but you're late to the party and the gifts you've brought are kind of lame.

The Zune will be on sale tomorrow; its retail price is $249.99

Photograph of Chris Pirillo at the Music/Tech Summit from penmachine's Flickr.