One of the better deals in gaming today is a $99 Xbox 360 that’s subsidized with two years of Xbox Live. Rumors suggested that Microsoft would be doing the same with the next Xbox, but those plans may have been scrapped.

Paul Thurrot reports that Microsoft has ditched its plans for a subsidized Xbox. The news comes from a recent tweet that also said Microsoft would be showing off its IllumiRoom technology at tomorrow’s next Xbox reveal:

A couple of Xbox news tidbits ahead of the launch… Illumiroom will be part of Tues event, subsidized Xbox v.Next model has been scrapped.

— Paul Thurrott (@thurrott) May 20, 2013

For those unfamiliar with the rumor, it was said that Microsoft would be selling the next Xbox for $499 with a subsidized version going for $299. The latter would be subsidized with a two-year Xbox Live subscription at $15 a month.

Now, this might be a good or bad move on the part of Microsoft. As Thurrot later speculates, Microsoft might just offer the next Xbox at a straight up lower price than the competition. Game consoles are generally sold at a loss anyway, but it’s hard to imagine Microsoft taking a massive hit early on just to undercut Sony.

The more likely scenario is that Microsoft will just go ahead with its plans to sell the next Xbox for $499. That would mean the company is confident that its machine will have enough exclusive content to warrant a purchase. That was at least the line being fed to gamers over the weekend during the Major Nelson podcast in which Microsoft’s Aaron Greenberg said that E3 would feature “tons of exclusives and world premiers” for the new console.

Still, many, including myself, think it’s unwise for Microsoft to ditch its subsidization plan entirely. The rise of smartphones have warped consumers’ perception of value and how much technology actually costs. The $350 price tag on the Wii U is evidence enough that consumers just aren’t up for paying that much for what many still consider a toy anymore. A subsidized model, even if it wasn’t “cheap” per se, would still perform better as people would think they were getting a deal.

All of this is nothing but rumor and speculation for now, but Thurrot does have a solid track record when it comes to Microsoft rumors. He reported the May 21 date for the next Xbox reveal two weeks before the official announcement from Microsoft. Even if Microsoft was ditching its plans for a subsidized Xbox, we probably won’t hear about it tomorrow. According to Greenberg, tomorrow’s next Xbox reveal will be about “the team, the people” behind the next Xbox.

Of course, we’ll be covering the next Xbox reveal tomorrow. It starts at 10 a.m. PST/1 p.m. EST.

[h/t: Neowin]