Microsoft this week responded to persistent rumors about an upcoming new Zune digital media device called the Zune HD. It's real, the company says, and will ship in the US this fall. But I can be a bit more specific: According to my sources, Zune HD will ship on September 5, 2009.

"This is the next step in our strategy to broaden Zune as an entertainment service for Microsoft," a posting on Microsoft's official Zune Insider blog reads. "We are really excited to bring the new Zune to market later this year, and ... we will be coming to Xbox, taking over the existing video marketplace and bringing a rich new experience with new features."

The Zune HD is positioned squarely against Apple's popular iPod touch, Microsoft says. The company has revealed the following details about the device:

Organic light-emitting diode (OLED) touch screen. Microsoft says that, "the bright OLED touch screen interface allows users to flip through music, movies and other content with ease, and the 16:9 widescreen format display (480 x 272 resolution) offers a premium viewing experience on the go." Critics may note that 480 x 272 is a "lower" resolution than that offered by the iPod touch and iPhone (480 x 320), but the Zune HD display is of much higher quality and offers a true 16:9 aspect ratio.

High-definition (HD) video output capabilities. "The HD-compatible output lets Zune HD customers playback supported HD video files from the device through a premium high-definition multimedia interface (HDMI) audiovisual docking station (sold separately) direct to an HD TV in 720p." This is an exciting capability that lends the Zune HD its name. Apple's devices, of course, cannot output at true HD resolutions.

Built-in HD Radio receiver. Microsoft says that, " Zune HD comes with a built-in HD Radio receiver so users can listen to higher-quality sound than traditional radio on the go. Users also will have access to the additional song and artist data broadcast by HD Radio stations as well as additional channels from their favorite stations multicasting in HD. If you don't like the song playing on your station's HD channel, switch to its HD2 or HD3 channels for additional programming." While the addition of HD radio may seem like a risk of sorts, remember that FM radio integration on previous generation devices has proven to be one of the most popular features, especially since Microsoft added the ability to purchase songs heard on the radio in Zune 3.

Wi-Fi. "Zune HD is Wi-Fi enabled, allowing for instant streaming to the device from the more than 5 million-track Zune music store." This is true for current generation Zune devices as well and isn't a differentiator with Microsoft's existing devices. It is, however, quite a differentiator when compared with the iPod touch, which is of course the point.

Internet browser. "Zune HD will include a full-screen Internet browser optimized for multitouch functionality." This is awfully vague, but I assume this browser is in fact based on the Windows Mobile IE 6 release. Microsoft also notes that the device will support a virtual keyboard (a la the iPod touch) for text entry in the browser and, possibly, elsewhere.

Here's what it looks like.

Zune HD

While most people have fixated on the new Zune HD--the subject of many rumors over the past few months--Microsoft's announcement treated the device as almost an afterthought. Instead, the big strategy piece that was revealed this week--and was, in fact, the point of the announcement, is that Microsoft is, as expected, bringing its "Zune entertainment service" (an interesting way to describe it, since the company current offers separate Zune Marketplace and Zune Social services) to its Xbox 360.

Microsoft has been talking for some time about merging the online capabilities of its popular video game system with the Zune. According to the software giant, it is bringing "the company?s end-to-end music and entertainment service to a new platform and new markets. Zune will extend its video service to Xbox LIVE internationally this fall. This marks an important development in the Zune strategy and brings the Zune brand to more than 17 million international Xbox LIVE subscribers."

Microsoft also notes that Zune will be a "premium partner" in the Xbox Live Video Marketplace, a service that will offer TV and movies--but apparently not (yet) music--content via its popular video game console (and, it should be noted, living room digital media device). Microsoft will reveal more details about this service, and how it interacts with the Xbox 360, at next week's E3 video game conference.

This new integrated service isn't the only unknown. Microsoft has not revealed pricing for the Zune HD, for example, and while we know that the device will incorporate flash RAM (and not a hard drive), it's unclear what the exact memory allotment will be. Microsoft says it expects the Zune HD to eventually replace the current flash-based Zune devices, the Zune 8 and Zune 16. The HDD-based Zune models will apparently continue selling, however.

[ Learn more in my follow-up blog post, More details about the Zune HD and Zune/Xbox Live integration! ]

Final thoughts

I'm excited about the Zune HD, mostly because it would be easy for Microsoft to simply abandon this market as it moves the underlying Zune services to more popular platforms. But the Zune HD looks like a decent replacement for the digital media functionality of the iPod touch, though it can't and won't ever be able to take on the iPod touch in the apps or gaming arena. This is exactly what I've been looking for, and it will be interesting to see whether the market embraces this new device.

As for the Xbox Live Marketplace integration, this is long overdue. And Microsoft's apparent fixation only on video content makes it a lot less interesting: Xbox 360 users should be able to sign up for a Zune Pass and stream the Zune Marketplace's voluminous music collection via the console, and to the best stereo setup available in the house. Until that happens, we're just looking at one step down a longer road.