A service called Zune Video will be arriving on the Xbox 360 in key markets including the UK, with Microsoft confirming that it will pair two of its brands as it separately announced a new Zune media player for the US.
Zune Video, a 'revised' service to the current US Zune Marketplace, will arrive in the UK on Xbox Live, as well as in the US, France, Italy, Germany, Ireland and Spain.
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"Xbox as a platform is broadening its audience, growing beyond games into living room entertainment," said Stephenson.
"That's what's driven the prioritisation of an enhanced Zune video service to Xbox… It's about changing the way people think about entertainment."
Not a Zune-gamer phone
The revelation falls far short of some predictions that a Zune mobile phone or portable games console was all set to be unveiled.
Meanwhile, confirmation of a new Zune player have been released, with Reuters posting up some of the details in a brief report.
The new Zune HD will, as the name suggests, incorporate high definition video, have a touch-screen and Wi-Fi connectivity.
The WiFi heralds the arrival of a web browser, and there will also apparently be an internet radio and the promise of better quality radio playback.
"Yes. We've got a tremendous device," added Stephenson. "This is a fantastic piece of hardware and absolutely it's going right up against iPod Touch; it's hyper competitive against that product.
Stephenson also talked more about the potential for gaming on the Zune, stating in the same Gurdian games blog article:
"Well, gaming on the handheld device is definitely a big opportunity for us, we have the DNA in our business.
"We're not talking specifically about the gaming aspect of our hardware platform at the moment, but it's definitely something that over time, we want to step up, and we'll have more announcements around that in the future."