Microsoft has finally confirm the Zune HD, with Microsoft confirming the handheld media device’s existence and it’s intent to go head to head or “touchscreen-to-touchscreen” with the iPod Touch this fall. Engadget has full details on the new Zune, including the announcement that Microsoft is doing away with the current Xbox Live video marketplace in favor of the Zune marketplace.

How this will work or how will this transition take place exactly won’t be fully revealed until E3, where Microsoft promises that attendees will learn “how Zune integrates into Xbox LIVE creating a game-changing entertainment experience.” This integration according to many sources may hint at a Zune or Xbox mobile gaming device.

Still, the announcement does bring up some very interesting questions and microsoft better be prepare because as you can remember they did have problems with the video marketplace and XBLA before. Some of the question that have been raise by gaming sites like Joysitq are: will video content purchased on one device be playable on the other and vice-versa?   Microsoft’s press conference at E3 has become a bit more clear but a whole lot more interesting.

Update #1: The Guardian reports that Microsoft told it to expect movie, TV and music downloads via the Zune marketplace on 360. In addition, a subscription service like Zune Pass will likely be offered to Live users, allowing them unlimited song playback and 10 song downloads a month for a set fee. More details and a feature blowout are expected to be announced and presented at next week’s E3.

[Via Engadget]

[Via Joystiq]