Looks like the prices are in the same zone as Apple devices and music purchases, and as Real (or Yahoo! Music Unlimited with the "to-go"/non-PC device option) for the subscription option (see the full press release for pricing details along with a long list of options etc.); that tells me Microsoft is pretty confident it won't have to compete by being the low-price/loss-leader disruptor.
Microsoft Corp. is putting the social into digital music, starting this holiday. Today the company announced that the Zune™ digital media player and online service will be available to consumers in the U.S. on Nov. 14, 2006, just in time for the holidays. The Zune device will retail for $249.99 U.S. (ERP) and will create new ways for entertainment fans to connect and share media experiences device-to-device through the use of wireless technology and new software scenarios.