First let me say that I'm not an iPod fanboy of any kind. I only recently got a gen 5.5 80gb iPod video. My favorite portable audio device (in terms of sound quality) is still my Sony MZ-N1 MD player or Creative Zen Micro.
The reasons I don't think the Zune will be successful are as follows:
1. The Zune costs the same as the 30gb iPod equivalent.
You can't be the underdog and price your product the same and expect to pose a real challenge.
2. The Zune is bulkier
Hard to win market share from Apple when most iPod fans buy it for aesthetics as much as the features
3. The Zune doesn't support Podcasts, movies, games, TV shows, organizer features etc.
As a multimedia device the Zune is mediocre at best. The Zen Vision:M does a much better job in terms of video support (than both the Zune AND the iPod) and is also priced at $249. These extra features (especially Podcasts) greatly effected my decision to finally get an iPod.
4. Wifi feature is a gimmick.
Once real reviews begin to hit the massess, people will be very disappointed at how MS greatly under utilized this feature.
5. The Zune is only ONE device.
It will be difficult for the Zune to compete against the iPod's complete line up.
There's not Zune equivalent of the 80gb iPod. There's not flash based Zune (Nano, Shuffle). Although this is an inherent disadvantages as a first time player. No one can expect M$ to launch a full lineup of devices from the get go, but it's still a disadvantage none-the-less.
6. A brown device!
You've got to be kidding with this one. I would've preferred to see a gunmetal version or a bright color like Red, Green, Yellow, Purple or whatever. Black and White versions don't really standout compared to the iPod.
In the end, I think the Zune is just an average device. I'd prefer the older Zen Vision:M to the Zune. I don't think M$ will be making a dent the iPod's market share anytime soon. I also agree that M$ will probably end up canabalizing it's partners before they even begin to challenge iPods.
If they were going to partner with someone on a device, they should've done it with Creative instead of Toshiba.