Microsoft confirmed Internet rumors yesterday by officially announcing its new contract-based Xbox promotion, which entails giving consumers the Xbox 360 4GB Console with Kinect Sensor for just $99 — if they sign up for a 2-year Xbox LIVE Gold membership in the process. (Currently the offer is only available on location at Microsoft Stores.)

If this promo sounds like your cell phone service plan that made your handset more affordable, that's because it's exactly like that, replete with early termination fees. Except, unlike contract-based phone service, Xbox LIVE subscriptions (up until this point) have been more akin to prepaid calling cards. That is to say, they are sold in small, finite increments and we more frequently see deals on them. You can purchase a fixed number of months at a discount, or even use various rewards points to score a month here and there.

And as such, the prospect of being locked into a static LIVE membership plan, with the unchanging rate of $14.99 per month, raises the question: Is this intriguing promotion actually a deal at all? According to our archives, the answer is a resounding "no."

Breaking Down the Costs of the Xbox 360 Contract "Deal"

What then would you pay for an Xbox LIVE Gold membership if you go it alone? The lowest price we've seen for a 12-month membership is $30, but we routinely see deals between $35 and $40. These memberships don't activate upon purchase either, so you could theoretically buy two at once, or even wait all year for another stellar deal (perhaps around Black Friday) to purchase before your current year is up.

So our careful deal-hunting Xboxer could get the same package — the console, Kinect sensor, and 24 months of Xbox LIVE Gold service — for approximately $330. If you went with Microsoft's new contract-based plan, you will pay $458.76 after two years. That's a full $128.76 more than our cobbled deal bundle.

Microsoft's Misguided Attempts to Shift Focus to Other Media

If Microsoft truly wanted to entice consumers with this promotion, it might have been more successful by offering enhanced LIVE services, as was rumored last week. But by offering just a standard Gold membership, this isn't much of a deal for a shopper who knows better; a few customized alerts for an Xbox 360 deal and LIVE membership will yield far better savings with just a little bit of patience.

Front page photo credit: LiveSide.net