Microsoft sees Zune as just opening act

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"The list is definitely long; there's all kinds of cool things that we are talking about," Erickson said. "What if you could listen to a song on the radio and flag it on the device and/or purchase it right from the device? What if you go to a concert and the musician stands up there and says anybody who has a device, take it out and I'll send you a playlist that's only for this concert, or pictures I just took."

For now, the wireless connection is used for just one thing: beaming music and other content to other nearby Zune owners.

There are lots of possibilities of where to go next, but Microsoft is waiting to hear what sounds cool to customers and would-be customers of the first version. The Zune is now Windows-only and will likely stay that way for a while, but Erickson didn't rule out a move into Apple's home territory--the Mac. "We'll definitely look at it," he said. "It's a lot of work for, in relative terms, a small number of customers."

The company does plan to take the Zune international some time next year, though Erickson did not offer a specific time frame or say which countries were tops on Microsoft's list.

In many ways, Microsoft is looking to emulate what made the iPod a hit--start simple and build from there. The company has also adopted Apple's model of handling device, software and service itself--a move that dismayed many of Microsoft's longtime partners.

But even there, Kevorkian said Microsoft has a way to go.

"We think in general the appeal of Zune will be very limited at the outset," Kevorkian said. "Zune today lacks the elegance of iPod plus iTunes, but that's not to say that won't evolve."

By the time Microsoft decided to go ahead with the Zune, the company was in a hurry to get onto the market. The actual Zune hardware is being made by Toshiba and is loosely based on that company's Gigabeat. The Zune Marketplace software, meanwhile, is based on Windows Media Player.

The software maker has said it expects the Zune effort to take time and be expensive, likely costing hundreds of millions of dollars to develop and market.

The company said it expects the Zune to be on sale at 30,000 locations, counting both online retailers and store locations. In addition to usual outlets like Circuit City and Best Buy, the Zune will be sold at places like Guitar Center, GameStop and Virgin Megastores.

Erickson said there will be plenty of ads for the Zune, online, on TV, in movie trailers and elsewhere. He didn't put a figure on launch costs, but said that "it's definitely a large investment for us and probably on par with what the Xbox launch was like."

"I think the word will start getting out there," he said.