Microsoft continues to push onward with its war against Apple in the MP3 player market space, but to be honest it has been a bit of an uphill battle. Things didn’t get any easier today when long-time retail partner, GameStop, announced that they are pulling the Zune from stores, citing a lack of interest from GameStop customers.

According to reports, GameStop will move to pull the Zune from retail stores and continue to offer the Zune via its online store until supplies are exhausted. GameStop suggested that the decision had more to do with the fact that the Zune didn’t fit with its strategy moving forward, and that it failed to spark the interest of GameStop shoppers.

Microsoft still has a number of retail locations that are continuing to sell the Zune, so current Zune owners should not panic yet; but even with all of the extensive work that Microsoft has done on the Zune, they have only been able to capture just a fraction of the MP3 player market space, which was estimated by some to be as little as 4% of the total market.

By way of comparison, it has been said that Microsoft has only been able to move a scant 2 million Zunes since it released the player in 2006, while in the same time frame Apple has sold over 10+ million iPods in the last quarter alone.

While there are some compelling areas where the Zune does have a bit of a lead over the iPod, it does seem that these features have not made a difference with consumers. Microsoft continues to spend a lot of time tweaking the software and features of the Zune, and the latest version 2.5 update added a variety new features, but it was largely ignored by consumers and the media.

Our take is that Microsoft really lost a golden opportunity to cross-pollinate Xbox 360 sales with the sale of Zune MP3 players. Still, Microsoft has to step up its game and give people a more compelling reason to buy a Zune over an iPod. The iPod continues to be the de facto standard for MP3 players, and in fact many owners are already on their second or third iPod.

Microsoft should seek tighter integration with the Xbox 360 to build a strategy that includes the Zune. Without really extending the abilities of the Zune beyond what the iPod can offer, we suggest that the Zune will just be another footnote in MP3 player history in a market space that is dominated by the iPod.