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Microsoft announced the price cut for the 30GB player on the Zune Insider blog run by one of its employees, just hours before Apple's news conference. The player will now cost $199.

Microsoft says it has been planning the price cut "for months" and expects the lower price to lure new customers, despite its insistence that it was already meeting its targets after selling more than a million units before the end of June.

The software giant faces a Herculean task in taking on Apple in digital music player sales, however, a category now defined by the iPod, which has sold more than 100 million units since its introduction in October 2001.

Microsoft introduced the Zune last year, touting its capabilities to share music wirelessly. At the moment only one model is available, though new versions are expected to be introduced before Christmas, with expansion into new markets also likely.