I think another problem with WP7 combating Android specifically is that there's so many apps that are blatantly used for copyright infringement that people add the value of free unlimited music, movies, and games into the the value of the phone. Pushing a pay service like Zune is a hard sell, no matter how cheap it is when you pay annually, factor in the ten free songs, or even promo codes like AT&T has now or @Zunesupport has on Twitter. There's certain people I don't even bother trying to sell Zune on because to them the only thing that matters is cost, or lack thereof. I'm over that.
I understand the attraction to mobile piracy; I just understand that at some point, people need to get paid. I don't mind paying a small fee for access to a large library of content, which is also why I pay for Netflix. And, I know I'm preaching to the choir here, but the experience with the integration of Zune within Windows Phone, Zune Pass, Smart DJ on the desktop, and apps like Shazam and my new favorite Artist Info is really top notch. I've yet to come across an Android equivalent.