On Monday, Microsoft announced the rumored Xbox 360 4GB with Kinect for a subsidized price of $99, confirming rumors that were running rampant about the console being announced this week. This is a new day in console gaming as Microsoft attempts to do something no other console manufacture has done, and if the company does it right, we could be in for an all new price war when the next generation of consoles are released.

This new $99 Xbox 360 4GB however, comes with a catch, one some may or may not like. Users who buy the device would find themselves in a two-year Xbox Live contract where they would be required to pay $15 per month. This brings the overall cost to $460 for a console that originally would cost $300 with the Kinect bundled. Obviously more expensive, but such a pricing model would work best for those who cannot afford to spend $300 right off the bat.

Microsoft stated that this move is just for testing new price models, and that the company isn't yet sure if such pricings would find its way to other Microsoft products, specifically the Xbox 720, which is expected to hit store shelves in 2013.

For those who are interested in this $99 Xbox 360 4GB Kinect bundle, the device can only be found in Microsoft stores. We suspect if this takes off, potential buyers would be able to find the console at all the popular retail stores in America.

Last month, Microsoft quarterly earnings showed its entertainment division experiencing a 16% drop in profits to $1.6 billion for the previous quarter, which could be the reason the company is aggressively trying to create new price points to get back on track. Right now only time will tell if this plan would work. However, we wouldn't be surprised if it did.

(reported by Vamien McKalin, edited by Surojit Chatterjee)