A $99 Xbox bundle: Microsoft's key to market domination?

Ever since the Magnavox Odyssey sold for $75 in the 1970s — roughly $230 by today's standards — most video game consoles have been punishingly expensive, says JP Mangalindan at CNN. But now, Microsoft will reportedly turn that tradition on its head by selling its Xbox 360 console bundled with its popular Kinect motion sensor controller for an exceptionally low price of $99. (Kinect alone typically retails for $149, and the console itself often costs hundreds more.) The catch? Any customer who buys in would also have to purchase a two-year Xbox Live Gold online subscription fee for $15 a month. Xbox sales were down 48 percent in the third quarter of 2012, and a lower price tag could have consoles flying off the shelves — and put pressure on competitors Nintendo and Sony. Is this deal as good as it sounds?

It's a brilliant strategy: The gutted upfront price will convince potential consumers "who may have been put off by the Xbox 360's current costs to splurge," say Mangalindan. The truth is, $99 is such a small "psychological threshold to cross" that it's unfathomable that Microsoft won't see a major sales spike, cementing the system's status as the number one gaming console. Plus, customers are locked into the Xbox experience for two years because of the subscription contract, so Microsoft doesn't have to worry about gamers abandoning them.

"$99 Xbox: Microsoft's killer move"

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But it's a bad deal for customers: Today, you can buy this bundle for around $300, says Jason Cross at Tech Hive, and the cheapest Xbox Live Gold subscription is $120 for two years. That's $420 total. This rumored new bundle, even with the astoundingly low $99 upfront cost, would actually be more expensive over time, totaling $460 after two years of $15-a-month fees are tallied up. Customers will probably still buy into this new bundle — but it's hardly a bargain.

"Microsoft's brilliant $99 Xbox plan brings the phone contract model to consoles"

Regardless, it could transform the living room: This isn't just a big deal for gamers, says Drew Bergmark at Platform Nation. It could also woo movie and TV lovers "looking to combat the traditional markets of cable and satellite providers." The web-connected Xbox gives you online access to services like Netflix and Hulu, and if you pony up for their subscription fees, you'd have access to a trove of movies and TV series through your Xbox for just $50 or so each month — far less than the average $95 it costs for cable in a big city. If HBO Go and YouTube get on board, this "could mean a revolution in the living room."

"The $99 Xbox 360 bundle and what it means for consumers"