THE XBOX ONE WILL BE AVAILABLE WITHOUT KINECT FOR $339

Hard-to-believe news out of Microsoft MSFT +0.86% this morning, as it’s just been announced that starting June 9th, there will be a $399 Kinect-free Xbox One.

Microsoft has seemed to be unwavering in its commitment to the Kinect motion/voice-control peripheral, refusing to unbundle it from the console even after altering many other aspects of the One in the wake of last year’s E3. Microsoft always maintained the Kinect was an essential part of the One, and as such, they couldn’t part with it.

But 2014 has brought with it the revelation that the Xbox One continues to lag behind the PS4 in sales. The last known numbers put Sony's system at 7 million sold to customers, while the Xbox One has five million sold to retailers. The gap is apparently wide enough to warrant drastic action like what we’re seeing today.

The announcement states that the current $500 Kinect bundle will also continue to be sold, and this fall, consumers will also be able to purchase a standalone Kinect if they picked up a $399 system and decided they did indeed want the peripheral. No word on the potential price of a standalone Xbox One Kinect as of yet.

If this wasn’t enough of an announcement Microsoft also revealed that they are freeing a number of app services from the requirement of Xbox Live Gold, including Netflix NFLX +0.75%, Hulu, HBO Go, Twitch, Machinima and many more.

As its direct competition, PS4, offers access to these services without a PS Plus subscription, and indirect rivals like Chromecast and Roku allow easy streaming with no additional fees, the move seems absolutely necessary for the Xbox to remain competitive in the “living room entertainment box” space. It rubbed most consumers the wrong way when third party subscription services were being hidden behind not just the ISP fee to access the internet, but then Microsoft’s additional Gold fee to access the internet through Xbox. It’s far too many subscription layers in this day and age, and an overwhelming amount of competition in the streaming space has forced Microsoft’s hand.

As expected, Microsoft is not even close to doing away with the hugely profitable Xbox Live Gold altogether, as it’s still required to play multiplayer games. Today Microsoft announced that there will be many free games, discounts and special offers associated with continued Gold membership as well. All of this, between moving apps outside of the paywall and offering deep discounts and free games, shows that Microsoft is doing their best to close the gap with Sony’s PS Plus, as now the two services are now nearly mirror images of each other.

If the timing of this seems odd just a few weeks ahead of E3, it’s important to consider what’s being announced here. Essentially both of these major items are things that fans have been requesting for a long while now. Microsoft is essentially admitting that a forced Kinect bundle was hurting them, and not the best idea, and the app/Gold paywall problem was absolutely necessary to fix quickly as more and more competition continued to emerge. Microsoft is correcting a pair of mistakes here, and that’s not really something you’d announce to boisterous cheers at E3 on stage.

Microsoft has shown remarkable flexibility when it comes to course correcting. They did so last year at E3 in record time when it came to the Xbox One’s online connectivity requirements and used games policies. Here, they’re doing the unexpected by once again listening to their fans and making very big moves to ensure the Xbox One remains competitive.

Whether this is the best thing for the console is up for debate. Despite its problems, Kinect has been a distinguishing factor for the One, and now making it optional will likely result in even less dev support for the peripheral. Still, I would argue the benefits of the huge price cut outweigh the sacrifice, but now we’ll have to see what happens with sales of the console starting in June.