Microsoft really took a step back from competing with Ballmer at the helm. Part of it relates to the problem where the company couldn't really leverage its monopolistic powers across different market segments to gain an advantage.

There is an alternate reality where, unburdened by worries of vertical integration, Microsoft leverages its tech with TiVo, XBox, and Zune to build out an XBox capable of playing some in-demand video. I expect this includes Viacom's library, which was experimenting with offering its first run shows online.

I can see that Microsoft persuading Viacom to give the XBox exclusive console access, either by getting bought out or an independent guarantee. This, combined with its Netflix streaming, pushes the XBox beyond being a console to something more.