Defective Xbox 360s Cost Microsoft Over $1 Billion

xbox360logoStandard return rates for console hardware normally hover in the 3- to 5-percent range. That is, unless you’re an Xbox 360 owner. The Xbox 360’s return rate is a knee-buckling 33 percent, according to a survey conducted amongst retail stores.

While this number may be alarming, Microsoft’s response to the console’s defects has been refreshingly positive. Back in September of last year, they extended the 90-day warranty to a full year. They’ve just recently extended the full-year warranty to 3 years.

All this warranty coverage comes at a price, though. Microsoft is reporting that they’ll eat between $1.05 to $1.15 billion in repair and replacement costs. Chump change for the Redmond giant but still nothing to sneeze at.

All in all, this is a wise move on Microsoft’s part, considering that their target audience is made up of hard-core gamers who don’t look kindly upon shoddy hardware. It appears to be working, too, as 90 percent of Xbox 360 owners say that they’d recommend the console to a friend (according to Microsoft).

In the end, building a loyal fan base is what it’s all about for the console makers. Addressing manufacturing issues is in the best interests of their customers and a huge step in the right direction for Microsoft. 

Microsoft’s Billion-Dollar Fix [BusinessWeek]