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The only issue I would think from Microsoft's point of view is that it would clearly put the Zune in people's minds as a bargain bin item rather than a premium player. The iPod, obviously, is seen as a premium device - people are more than willing to pay more for it - and, based on the price point at launch, it seems obvious to me that Microsoft wants the Zune to play in that same market.
I think a better idea is to broaden the product line, with flash player, add podcast support, flesh out movie content deals in the Zune Marketplace, and then see where the brand sits in the market rather than just jump right to throwing in the player for a contract. I think it is still too early for that, though, really, I am surprised that it is taking Microsoft so long to add features like these.
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