ZDNet: “Microsoft tried to "engage" Apple in a partnership that would have officially made the iPod interoperable with Xbox, but Apple rejected the overture. "So we went in and built all of the support we could," Henshaw said.”

I missed this story originally, but I’m glad that I came across it today. Basically, Microsoft decided to ensure that Apple’s iPod’s are compatible with the XBOX-360 feature set despite not having any explicit cooperation from Apple. Now if we believe that the real battle between Microsoft and Apple is for the living room, for the media furnace, for the entertainment hub of the home, then this is a great way to give Microsoft a slight edge over Apple. Even though the new G5 is a really sexy addition to any livingroom, Apple needs to displace the DVD player, the HD Television set and the gaming console before they can claim ownership of the livingroom.

Ain’t gonna happen.

On the other hand, Microsoft simply needs to hold onto and extend its gains in the gaming console space in order to succeed – the XBOX is compatible and complimentary to the DVD player, the HD Television set – not competitive. And now, the XBOX is compatible with another key piece of the home media experience – the iPod.

So why is this important? Well, it points to a very competitive future for the livingroom. Despite the multitude of convergence plays that we’ve seen over the years (and will, no doubt, continue to see), the smart players continue to make good games with a highly interconnected, fully compatible but very specific approach to home media functionality. Microsoft and others are charting a course towards a very specific outcome that sees them owning strategic aspects of home media technology, but not all of it. This goes against the game plans that Sony, Apple and others are laying out, but they seem to make the most sense.

After all, its impossible to expect to be successful when you are trying to be all things to all people. Microsoft seems to be very aware of this and looking to build on their strengths (operating systems platform, development platform, gaming platform) and avoiding the areas where they are weak (entertainment hardware, networking, media development). By co-opting the iPod, they’ve now opened up a whole range of options for a class of users whom Apple was assuming to be locked in to their weaker, proprietary approach. Now none of these users are forced into a suboptimal binary decision between an all Apple media solution that includes the iPod or a weaker Microsoft driven one that doesn’t.

Very smart. This is precisely the type of innovation and competitive that we should strive to preserve. Unfortunately, this is exactly the type of competitive that most of our recent intellectual property law seeks to prevent. It will be interesting to see where this one lands.