The deal will be on offer June 9 and will give consumers access to apps like Netflix, Hulu Plus, YouTube and HBO Go without having to pay the $60 annual fee for the service. The Live Gold subscription will also not be needed to access premium services such as OneGuide, Internet Explorer and Skype.
"We've heard that you want more choices from Xbox One," wrote new Xbox chief Phil Spencer in a blog post. "You want a wide variety of options in your games and entertainment experiences and you also want options in your hardware selection."
The cheaper price will help bring the Xbox closer to the price of Sony's PS4 and importantly removes the $60 subscription fee that the PS4 doesn't have.
The new deal is a turnaround from Microsoft's earlier stand that it would sell the Xbox console bundled with the Kinect. The company says that if users want to buy the Kinect later, it will be on offer later this fall.