There's been a fair amount of ink on Microsoft's moves in the field of convergence of late. Of course, there was the news that Microsoft had partnered with MTV to create a digital music service called Urge which would be packaged as a part of a new version of Windows Media Player. Then came the news that members of the Xbox staff were being positioned to direct Microsoft's media strategy versus Apple as well as Sony as part of the Entertainment and Devices division's reorganization.
This kind of move on Microsoft's part suggests that despite losing an estimated $4 billion on the Xbox in an attempt to capture market share from Sony, Redmond believes strongly in the initiatives the Xbox team has put together (like Xbox Live and microtransactions via Microsoft Points), and expects them to put together similarly innovative initiatives for going head-to-head with Apple in the field of downloadable music.
There are a lot of issues that Microsoft and MTV are going to have to confront if they want to make a go of it, but the first major stumbling block is Windows Media Player. WMP is functional, but in my opinion it's incredibly user-unfriendly compared to iTunes. (Don't even get me started on how you can't delete a file without using your mouse.) Unless Microsoft's interface designers retool Windows Media Player to make it even friendlier than iTunes already is (which isn't impossible-- I have a few nits to pick w/ iTunes's design), all the MTV content in the world won't get people to use Windows Media Player as their primary music program.
Still, the Xbox guys are pretty smart, as this interview with J. Allard (and Sony's Kaz Hirai) shows. If there's anyone at Microsoft who can pull this off, it's them.
Update: Cory Bergman over at Lost Remote is thinking along the same lines as I am re: Urge and the need to compete with iTunes on usability.