MAY 2, 2012  Microsoft is introducing a new Xbox 360 subscription business model that takes after mobile phone contracts. The company is now offering a 4GB 360 console with Kinect for $99. Consumers who take advantage of the deal agree to subscribe to Xbox Live for two years at $15 a month ($360). The same bundle retails for $299, and two years of Live membership adds another $120.  So consumers who take advantage of the new subscription option end up with a $419 value, yet will have spent $459 over two years.

Impact: Microsoft seems to be betting there are a lot of suckers out there.  Most users would do better charging an extra $200 on their credit card and pay $5 a month for Xbox Live.  Of course, a 4GB Xbox 360 is the low end of the totem pole.  The appeal of this might be limited to high school and college students with limited credit and some extra beer money on hand.  We do not think it will have a major impact on Xbox 360 sales.