When rumors of the Zune, even before it was given its current name, first surfaced over a year ago, it was supposed to be a game player first and music player second. In that role it was more of a Microsoft Xboy (once a whispered tag), capable of running killer portable apps like Halo. When that dream was whisked away by MS itself, gamers lost a bit of interest (while Nintendo and Sony breathed a sigh of relief). Still, the device maintained some pretty cool features, including a 30 GB hard drive, a unique network, and Wi-Fi capabilities. It’s now looking as though the fresh new player is taking its toll on Apple’s market share, with iPod dominance down this year from last.

In November of 2005, only Creative existed to challenge Apple’s throne atop the hard drive digital music player market. At that time, the iPod line owned 86% of US sales, with Creative coming in a (very) distant second at 7%. This year, after a generally slow start, the Zune has further eroded the iPod’s dominance. Although Cupertino execs are unlikely to fret just yet, the iPod’s HD share is now 82%, with the Zune and Creative HD coming in at 9% and 4% respectively.

When it comes to all models, HD or flash, Microsoft owns less than 2% of the market.

Although it’s going to be a long battle, Microsoft’s clearly interested in waging a Hundred Years’ MP3 War if that’s what’s necessary. That’s evident through recent updates, such as the newly released Zune Firmware 1.2. However, for the immediate future it may not be Apple that hurts most, but the lesser competition, like Creative. It’s likely the Zune will rope in those dissatisfied with Apple or the iPod, leaving the race for (a distant) second very intense.

Find the Zune at Gizmo Shop! $209!