Microsoft introduced on Monday new software features to the Zune online store, expanding its content with video titles from COMEDY CENTRAL, FUNimation Entertainment, MTV, NBC Universal, Nickelodeon, Starz Media, Turner Broadcasting, UFC, VH1 and others. Until now, only music videos were available on Zune Marketplace.

It's well known that NBC ditched iTunes among rumors that it could not reach an agreement with Apple over pricing, and now NBC has jumped into the Microsoft bandwagon. As of this week, Zune customers will be able to choose from 800 downloadable episodes, including popular titles such as COMEDY CENTRAL’s “South Park,” MTV’s “The Hills,” NBC’s “The Office” or “Heroes,” SCI FI Channel’s “Battlestar Galactica,” Starz’s “Ghost in the Shell,” UFC’s “The Ultimate Fighter” or VH1’s “Rock of Love.”

Customers will be charged 160 Microsoft Points (the equivalent of $1.99) for each episode at launch. NBC said the deal with Microsoft is actually what they’ve been looking for, considering Microsoft’s flexibility on pricing issues.

Microsoft also released a software update for Zune which brings about several improvements, especially in the area of wireless connectivity.

The Zune online store offers customers over 3.5 million tracks (most of which are in MP3 format), 800 television shows, 4,800 music videos and 3,500 audio and video podcasts. With the help of the Zune Pass subscription, consumers will be able to see what their friends are listening to via the Zune store (through Zune Cards, which are in fact snapshots of the music they are playing on their Zune). Also, the Zune Pass subscription service gives users access to every song in the catalog for $14.99 per month, a good deal which is not available on iTunes.

The "new" Zunes, launched late last year, are available in models of 4GB ($149.99), 8GB ($199.99), 30GB ($199.99) and 80GB ($249.99). Of course, the last two models feature a hard drive instead of flash memory. For the same $250 price as the 80GB iPod classic, the new Zune 2.0 80GB offers a much larger screen, a FM radio, wireless player-to-player sharing, Wi-Fi syncing with your PC, and a rear panel that can be customized with some cool artwork. This makes the Zune a much better deal for those who aren't necessarily Apple fans.

The second generation Zune is slimmer and features a rounded touch-sensitive control. Overall, the gadget is a vast improvement over the previous model launched a year and a half ago and is clearly the best competitor to the iPod. The Zune supports MP3, WMA, WMA lossless, PlaysForSure, and its own proprietary format for Zune Pass subscriptions.

Meanwhile, Microsoft’s MSN Music service is dead and buried as of August 31, when the company will stop issuing DRM keys, a company statement unveiled on Tuesday. What that will do is allow music to play only authorized computers, but transfers on other computers or upgrades from Windows XP to Vista will mean losing the music library.

The MSN Music Store was officially launched in September 2004, but it never managed to become as big as Apple’s iTunes Store, which meant an inevitable announcement two years later:  the service stopped selling downloads, redirecting customers to Zune or Real Rhapsody.