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Microsoft makes $99 Xbox 360 official – with a few catches

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After a week of speculation, Microsoft has formally announced plans to offer a subscription-based Xbox 360/Kinect bundle requiring a two-year paid commitment.

Customers will pay $99 for a 4 GB Xbox 360 and Kinect up front, then will pay $15 per month for the next two years. They'll enjoy an Xbox Live Gold subscription during that time period, but no additional functionality in the service.

People who decide they've had enough can opt out of the program, but early termination fees are as high as $250, depending on when the contract is broken. The bundle is targeted at consumers who have sat on the fence as the Xbox 360 price has held steady for the past two years.

However, it's not necessarily a better deal.

The initial $99 for the new offer is considerably lower than the $299 an Xbox/Kinect bundle will cost you today. But in the long run, the subscription package will cost people more. The monthly fees will run nearly $360 over the life of the subscription, bringing the total to about $460. Buying that bundle and two one-year subscriptions to Xbox Live Gold would only run $419 -- possibly less if you find Xbox Live gift card on sale.

Then there's the matter of availability. The offer is only available at Microsoft retail stores, of which there are a mere 21 locations around the country.

People considering the deal should also keep in mind that the next generation Xbox is rumored to launch sometime in late 2013. That's well within the two-year subscription timeline, meaning anyone who buys the bundle today will likely have to pay roughly $72 - $96 in early termination fees if they opted to pick up the new system and cancel out. (Though, to be fair, early adopters aren't likely to take advantage of this deal.)

The move is a continuation of Microsoft's strategy to expand the Xbox beyond the gaming world. Rather than competing with the Wii (currently $140), upcoming Wii U (whose price won't be known until well after E3) and the PlayStation 3 ($250), the $99 Xbox is targeting home entertainment systems like Roku and Apple TV.

Another upside of the lowered price is that it leaves more initial cash in pocket for gamers to spend on new games, often a concern for new buyers who have forked over hundreds on the hardware alone.

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