Update at 5:10 p.m. PDT: Changes were made based on a draft version of the Windows 7 Reviewers' Guide.
It looks like Microsoft is making the right moves to counter some of the problems with Vista: application and hardware compatibility are top priorities, and most of the UI tweaks I've seen so far seem helpful rather than arbitrary, as many of the changes in Vista seemed to be. But the release of Windows 7 is still a year away, and there will no doubt be modifications between now and then.
But forget the big picture...what's in store for digital audio in the next version of Windows? Here's a quick rundown of what in known based on the very early pre-beta shown in Los Angeles:
Media Player not dead. Windows 7 will ship with a new version of the Windows Media Player. This is somewhat surprising, given Microsoft's complete neglect of the Media Player since Vista's release and its emphasis on the Zune PC software, which has its own playback and organizational features. But apparently Microsoft has realized that native playback of digital media within Windows is too important to force people to download an application separately. This is not the case with some other applications--for instance, Windows 7 will not come with Mail/Outlook Express, Photo Gallery, or Movie Maker--instead, users will have to download Windows Live versions of these applications. (Or PC makers will have to pre-bundle them.)
Non-Microsoft formats supported. Microsoft is at long last capitulating to the inevitable and natively supporting AAC audio (as well as H.264 video--both are parts of the MPEG-4 standard), which has become a dominant format thanks to Apple's AAC support in iTunes. For years, Microsoft used the Player to promote its own Windows Media format--for instance, it didn't support full-bitrate ripping of CDs to MP3 until Windows Media Player 10, released in 2004--but apparently the Media Player team is following Zune's lead here.
Networked music. Microsoft promises major ease-of-use improvements for home networking in Windows 7 (hallelujah), and streaming home audio is no exception. You'll be able to stream media from any Windows 7 PC to any network-connected device that supports version 1.5 of the Digital Living Network Alliance (DLNA) standard, and vice-versa. The Windows Media Player will even transcode your media on the fly to the appropriate format for each device on your network. This sounds great on paper, but of course the devil's in the implementation details. Still, it's a great step forward from Windows Media Connect in XP and Vista, which only supports the Xbox 360 and a handful of other devices.
Bluetooth audio. Windows 7 includes a Bluetooth audio driver, meaning it will natively support Bluetooth speakers and headphones--no installation required. (The lack of support for Bluetooth audio in Vista drew lots of complaints.)
Intelligent routing. Microsoft promises that audio will flow more reliably to the proper devices--for example, a song will naturally play over your speakers, while a Voice-over-IP call will flow to your headphones. Again, nice idea, but wait to see if the implementation works.
Libraries. A new feature, Libraries, will arrange similar types of files from across your PC--and across all the PCs in your network--within a single virtual folder. So all your music, even files you've neglected to put in your MyMusic folder, will appear in this virtual Music Library, which should make it easier to organize and find songs outside the context of the Media Player or Zune (or iTunes) libraries.
Music Wall. It looks like the Media Center team has borrowed a trick from the Zune PC software: when you're listening to an album in Media Center, the background will gradually scroll through images from all the album art in your collection.