Undisclosed sources told The Verge that Microsoft will release an Xbox 360 bundle for $99 with a two-year contract including a $15 monthly fee.
The bundle will include an Xbox 360 console with 4GB hard drive, a Kinect sensor and an Xbox Live Gold subscription for the duration of the two-year contract. It was also suggested that the system could include access to paid entertainment services such as streaming cable and sports package providers.
An early termination fee would apply to those who wish to end the contract before the two-year deal expired.
Bought separately, a 4GB Xbox 360 and Kinect bundle with a two-year Xbox Live Gold subscription would cost $420 up front, less than the cost of the rumoured bundle totalling $459 over the course of two years.
However, a subscription-based console at a low introductory price of $99 could prove to be a popular option, especially if it included a subscription to paid entertainment apps such as Netflix, Hulu Plus, HBO Go, ESPN and Comcast Xfinity.
Microsoft is also reportedly planning to launch its own Spotify rival music service, 'Woodstock', which is said will be officially announced at E3 2012 in June.
The Verge reports that Microsoft could be ready to launch the new Xbox 360 bundle as early as next week. However, with E3 only a month away and Microsoft saying it will not reveal the next Xbox at the event, an announcement could be held for the show.