Microsoft has made a pre-E3 announcement for the first non-game application for its X-Box console, the Xbox Music Mixer will include PC and Xbox software that will allow owners to transfer digital music and photos from their computer to the console's hard drive. I think I've heard of similar things already though hacking was needed but no more, the $40 package is expected to be available this fall.
Additionally Microsoft has announced that Doom3 will make it to the X-Box and new X-Box Live services are being planned.
In the other hand, Microsoft reported an operation loss of nearly twice as much on its Xbox, games and consumer hardware businesses in the most recent quarter than it had a year earlier. Microsoft said that its Home and Entertainment division lost $190 million before taxes, write-offs and other charges in its fiscal third quarter ended March 31, compared with a loss of $97 million a year earlier.