Microsoft has confirmed the badly kept secret that it is planning to challenge Apple by developing a series of digital music and video players.

Microsoft said it would introduce a "family of hardware and software products" under the Zune name by the end of 2006 to challenge Apple's iPod and iTunes, reports the Telegraph (U.K.). "We see a great opportunity to bring together technology and community to allow consumers to explore and discover music together," Chris Stephenson, general manager of marketing at Microsoft, is quoted as saying.

The company is in talks with Hollywood execs to license movies and TV shows for use with its device. Microsoft hopes Zune will drive growth, as iPod has for Apple. Meanwhile, Apple itself has plans, which probably include an iPod phone, according to the article.

The iPod has more than 75 percent of the digital music player market in the U.S. (and more than 50 percent worldwide), writes Reuters, citing research company NPD. iTunes accounts for over 70 percent of U.S. digital music sales.