Xbox 360 Failures Acknowledged

With complaints mounting about hardware failures in the Xbox 360, Microsoft has extended the warranty for affected systems from one to three years and will reimburse customers who’ve already paid for repairs. Microsoft estimates the warranty extension will cost more than US$1 billion, suggesting that millions of consoles might be affected. The move could restore the goodwill of existing Xbox 360 customers so they continue buying games-a necessity for the Xbox business to become profitable-but could drive undecided consumers toward competitors. Even so, the company remains confident that the Xbox will begin turning a profit this year.

How Big Is the Problem?

Since the Xbox 360 was released in Nov. 2005, there have been fairly consistent reports of complete hardware failures rendering the console inoperable-a type of hardware failure nicknamed “the red ring of death” because it’s characterized by three red blinking lights around the console’s power switch. Microsoft had claimed that the problem was rare. In Sept. 2006, however, Microsoft offered to waive the cost of repairs for any unit manufactured before Jan. 1 of that year, and acknowledged that these early units were coming in for repair at a higher rate than acceptable.