The new model is available on Microsoft's for US$349.99. The company earlier this week dropped pricing on existing models, with the 16GB and 32GB models now costing $199.99 and $269.99, respectively.

The 64GB device stores up to 20 hours of high-definition video or up to 16,000 four-minute songs and plays at a 128-bit rate, according to provided on Microsoft's Zune site.

Microsoft first launched the Zune HD player in September to compete with portable media players including Apple's iPod Touch. The slim device comes with a 3.3-inch OLED (organic light-emitting diode) touch screen and is powered by Nvidia's Tegra chip, which enables playback of high-definition video. The Zune HD weighs 0.16 pounds (74 grams). Wireless connectivity includes 802.11b/g Wi-Fi.

The company earlier this week released a firmware update, adding support for more video formats and including features to automate the creation of playlists. The new model comes a few days ahead of Microsoft's launch of a smartphone code-named Pink Project.