Reports of Zune’s death may not have been greatly exaggerated.

Citing a source familiar with the decision, a Bloomberg report this afternoon echoes rumors from mid-February, saying that Microsoft plans to discontinue making its Zune player. The Zune brand, however, will live on as media player software on Windows Phone 7, and on the Xbox 360, Bloomberg says.

The apparent reason for the shelving of the device is “tepid demand.”

A Microsoft representative issued the following statement to CNET:

“We’re absolutely committed to providing the best movies, music, and TV show experiences through Zune on Xbox, the PC, Windows Phone 7 and Zune devices. We’ll share more information about the evolution of the Zune entertainment service and Zune hardware as future plans develop.”

Reports surfaced last month that Microsoft planned to phase out the Zune brand, further splitting up the intellectual property among various product groups. Original speculation had centered on a lack of the Zune’s presence among Microsoft’s various product integration plans it had shared with members of the press and investors in the company’s announcement of its strategic alliance with Nokia.

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