Fried's detailed report, based on an interview with Enrique Rodriguez, a Microsoft vice president in charge of the company's Mediaroom IPTV effort, who now oversees the larger Zune software and services team.

"Zune the service needs to transcend Zune the device," he told Fried.

The smaller Zune hardware team now reports to Tom Gibbons, a vice president in charge of mobile phone hardware and relationships with Microsoft's mobile device partners, among other things.

Update: Here's what Bach had to say during an interview with me, Joe Tartakoff of the Seattle P-I and Todd Bishop of TechFlash on the sidelines of the company's Minority Student Day today in Redmond:

"There's a group of folks that produce the Zune hardware and the software that's on the device, so it's actually a hardware and software team. And we have consolidated that with a team under Tom Gibbons, who you know, you should effectively think of any work we're doing -- hardware, and small platform work, we want it in one team and we had it in two teams, so we put it in one team, so that's all.

"On the rest of it, you know, we're going to move different pieces of the software around. The rest of it is the client software that's on the PC. We combined that [under] Enrique Rodriguez, with the team that does Media Center, which is also entertainment software on the PC. We felt like we wanted all those people working on entertainment software on the PC in one place.