Want a new Xbox 360 for $99? Pay for Xbox Live for two years

It turns out the rumors suggesting Microsoft would reduce the price of its Xbox 360 and change how it charges for its console were true.

The software giant today announced that customers can now buy the Xbox 360 4GB console with Kinect for $99. However, in order to get the $100 savings, they'll need to sign up for a two-year Xbox Live Gold membership, costing $14.99 per month.

The Verge first reported last week on Microsoft's plans to offer a special-price Xbox 360 bundle, saying that the deal would be available exclusively in Microsoft's U.S. retail stores. According to Microsoft's Web site, customers will be able to redeem the offer by bringing a code to a Microsoft Store, seeming to corroborate The Verge's claims.

Still, the deal might be a tough pill to swallow for some customers. The same Xbox 360 4GB with Kinect bundle is available for $299.99 at GameStop. Assuming the buyer won't play games online, that would actually be the cheaper option, since the 24-month Xbox Live deal will force customers to pay $360 over that period. For online gamers, though, it's not a bad deal.

The important story here is that Microsoft is thinking outside the box. For years, companies have been selling consoles for a single price and leaving it at that. Microsoft is now looking to follow a quasi-carrier model by selling the device at a discount and making its cash on the backend with services. Whether Sony and Nintendo will follow suit remains to be seen.

CNET has contacted Microsoft for confirmation that the deal is only available in its retail stores. We will update this story when we have more information.

Update 10:07 a.m. PT to include more details.