Microsoft to make iPod rival?

It's no news to anybody that Apple is a bit ahead of Microsoft in the digital music business. Bill Gates and his company's partners have long predicted that consumers would like the choice of brands and features offered by Microsoft-compatible music players, but consumer democracy has voted overwhelmingly for Apple's iPod.

Now comes a BusinessWeek story putting flesh on an idea that's been floating around for some time. The magazine reports that Microsoft has a team of people working on a potential new device, to be created by Microsoft, that would take on the iPod directly.

The device would likely add gaming capability to the ordinary video-and-music combination of the iPod and today's rivals. BusinessWeek's article speculates that any such device would trade on the strength of the Xbox, rather than simply tackle the iPod on its own turf.

The idea is still in the planning stages, and no final decision has been made, the article says. This kind of strategy would carry serious risks for Microsoft, which has staked its claim in the digital media business primarily as a provider of software for dozens or hundreds of other partners around the world, both hardware and software. If it makes its own player, this partner strategy could be severely undermined, as the article notes.

That said, the iPod's lead is only getting bigger every day.