Some rumors have Apple developing cell phones with iPod-like capabilities, presumably based on some version of the Apple OS. In addition, other rumors have Apple developing a computer to control media flowing over home networks. In other words, iPod and iTunes can be seen as Apple's foot in the door in the consumer home and gadget markets that Microsoft covets. Media players and music services, then, are just an early, although important, skirmish in that battle.

Another problem for Microsoft is that the PlaysForSure subscription music services have yet to become widely popular. One reason for that is that iPod's massive success; iPod owners would have to buy new devices to use the subscription services. And, to be blunt, I've looked at many, if not most, of the non-iPod devices available and they simply are not as sexy as iPods, which have exquisite design and usability, not to mention extremely positive word-of-mouth.

"Microsoft is looking to provide a reference product that would stimulate the market," Rubin noted.

A compelling Microsoft device for subscription music services could be a big boon for those services and for Microsoft's aspirations in the gadget and home markets. Seen in this light, a Microsoft media player would be a tactic in a larger battle, not a broad strategy. After all, as Rubin noted, Microsoft's primary need isn't to create a best-selling media player, but to stop Apple.