Microsoft's Zune digital media player will come preloaded with music videos when it is released later this year.
Apple dominates the portable music player market
Videos from artists including UK pop band Hot Chip will feature on the device, following a deal between the software giant and music company EMI.
Reports had speculated that the first devices would not play video.
Zune is a catch all term for a media player, software and download service that some say could challenge Apple's dominance in the digital music market.
Apple's iPod accounts for more than 50% of digital music players sold worldwide while iTunes, the company's digital music store, has a 70% share of its market in the US.
iTunes offers music for sale from many different record labels including Universal, Warner Music, Sony BMG and EMI.
"Apple has been an important partner in building the digital music market but any well-funded serious entrant has got to be good news for the artists and industry," Jeff Kempler, executive vice president of EMI unit Virgin Records America, told Reuters.
The new deal between Microsoft and EMI would see music videos already loaded on to the device.
EMI artists that could appear on the devices screen include alternative rockers 30 seconds to Mars.
The record company said it expected its videos would be preloaded alongside offerings from other record labels.
A spokesperson for EMI said that the label was still in discussions about other content deals with the software giant.
Details of the Zune device and download service - announced last month - are still sketchy. However, Microsoft has said the player will use a hard drive and wi-fi, to allow users to download media direct to the device. The wireless capability may also allow users to share music.
Dubbed by some as the "iPod killer", the Zune represents Microsoft's first steps into the handheld entertainment market.
Technology observers expect Apple to revamp its line-up of iPods later this year or early in 2007.