Their main problem is that conceive the service as value added for the platform, which is basically non existent now except for Xbox.

If they instead spun off a group of engineers and allowed them to create a great streaming service with no restrictions or handcuffs because windows or office or IE or whatever is being pushed this month, and then use the platform as a value added for the service you would get much better result IMHO.

That would mean develop for every mobile OS + windows and osx as a minimum from the start, not as an afterthought. No windows live or whatever it is called now ( linkable if you want), etc. Things Microsoft would never approve.