Yesterday I did a post of how the Zune was going to be a losing proposition for Microsoft during this coming Holiday Season. This was based on the fact that Microsoft had announced that it was going to be losing money on each Zune sold at the price point it had announced.

I may have given the impression that I felt the Zune was no threat to Apple’s iPod or that Microsoft would have no luck cracking Apple’s domination of the mobile digital media marketplace. Richard Querin pointed this out to me in the comments of yesterdays post.

While I think it’s going to take Microsoft some time to gain a foothold, I have no doubt that they have the resources to do so. As they have shown with the X-box, they are willing to lose substantial money initially to gain market share.

There’s an interesting post by Mike Elgan on Playist (below) that clearly outlines his feelings of the real advantages of the Zune and Microsoft. He also states that he feels Apple is scare and why they should be.

The Zune is unlike any product Microsoft has ever shipped. It’s actually very nicely designed, surprisingly minimalist and (dare I say it?) “cool.” (Zune marketing looks cool, too. The user interface is fluid and appealing — and, again, like MySpace — customizable. Users will be able to personalize the Zune interface with photos, “themes,” “skins” and custom colors.

So while Apple fans are brimming with confidence that their beloved iPod will continue to vanquish all foes — including Microsoft’s laughable folly — Apple sees the big picture and is rightly nervous about it.

Even if Apple is able to retain its lead, it could still be hurt — badly — by the Zune, which will capture mind share, grab market share and squeeze Apple on pricing.

Apple is scared. And for good reason.

The iPod is the soul of Apple’s entire business. Apple has been relatively successful at winning converts from Windows to Mac OS X, for example, in part because its whole product line basks in the glow of iPod’s success, hipness and ubiquity.

Apple has recently and preemptively lowered the price of iPods, announced an iTV set-top box — which will ship later than Vista — and is probably working feverishly on a bigger-screen, wirelessly enabled iPod.All these efforts may not be enough to save the iPod from the Microsoft consumer media juggernaut. Microsoft has the money, the clout, the partnerships, the mind share and the market share to drive Vista, Soapbox, Xbox and Zune into lives of hundreds of millions of consumers.

Playlist: Opinion: Why MS’s Zune scares Apple to the core

Mike makes some good points and of course it could turn out that he’s right. I still have some reservations on how much the Wifi capabilities will drive sales and how it will affect the battery life of the Zune.

In any case, the real winner will be the consumer. Competition will drive technological advancements and result in better services and lower prices.

technorati tags:zune, microsoft, ipod, apple