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Xbox Warranty To Cost $1 Billion, Customer Good Will
An anonymous reader writes "The Financial Times reports that Microsoft will take a charge against profits of more than $1bn as it tries to limit the potential damage to its videogames business from a design flaw in the Xbox 360 games console leading to units failing." It's bigger even than that, though. Early this week the news was about Xbox Live's growth, but since yesterday the headlines have taken a turn. Peter Moore has admitted the company is shy of their goal, some 400,000 units short of the 12 million Xboxes they'd planned to ship. These facts combined have made for some grim questions, including the San Jose Merc's Nooch asking why you'd want to buy an Xbox in the first place.
I'm not a Microsoft fan - not by a longshot (I've never - NEVER - used Windows at home. Went from DOS to OS/2 to Mac OS X. But I digress...)
Anyway, this is a great decision on their part. It's nice to see that they acknowledge the problem and are willing to stand behind their product. Nothing negative about that. And they're going to reimburse people who've previously had the repairs done.
This is a good thing, and I'll applaud them for doing the Right Thing (tm).
Not that I'd buy an XBox (hell, all I have in the house is an Intellivision and a Dreamcast...), but it's still good to see them do what's right.
I'm going to have to respectfully disagree with Nooch here. That's a really extreme viewpoint to take. Yes, these technical issues are pretty bad; I myself have returned my 360, though I only had to do it once before I got one that seems solid.
...
That said, dismissing an entire console because of technical issues is pretty crass to me. Not only have there been several wholly worthwhile titles released for the system already (Crackdown, Overlord, plus tons of multi-system releases), but this summer, fall and next spring bear an avalanche of awesomeness. Bioshock, Mass Effect, that Halo thing, Two Worlds
I guess I understand where he's coming from, but I feel reluctant to dismiss great games so casually. Ultimately, it all comes down to the games, and the 360 has some really great offerings.
Unless my maths are wrong, they're 3% shy of their target. Which doesn't seem to be too shabby.
Ummm, because the Wii hasn't got the graphics capability of the XBox? The PS3 and the Wii combined don't have the half of the games portfolio that the Xbox has? That the online gaming for the Xbox is way ahead of the other consoles? That the PS3 costs double that of the Xbox?
I don't own any console but this whole piece just seems to be pointless Xbox bashing to me.
Avantslash - View Slashdot cleanly on your mobile phone.
MS may be late to acknowledge the issue - no later than I'd expect any major corp to be, but late regardless - but if retroactively extending the 90-day warranty to three years isn't a move to earn customer good will, I don't know what they could do that would.
I mean, aside from shipping free 360s to every gamer on the planet...which seems a little unreasonable.
I'm not one to throw out accusations of spin too often, but trying to present this as some sort of disrespect, slam, or screw job by MS seems a little unwarranted.
Reality has a conservative bias: it conserves mass, energy, momentum...
Somebody doesn't understand what "good will" means. By voluntarily admitting to problems and accepting returns/recalls, they are increasing good will towards themselves. Not admitting to a problem hurts goodwill. I'm not buying an XBox 360 because I don't like them, but I wouldn't not buy one because of this recall/warranty stuff.
I don't respond to AC's.
Ok. Someone explain to me why this is going to COST MS goodwill. I purchased my Sony laptop explicitly because they were offering returns on their batteries based on a few isolated incidents (not sure if this was legally mandated). That shows that Sony wanted to pretend to do the right thing for the customer which benefits me in the long run. It makes perfect sense to buy an XBox360 if you thought that the price was right before the warranty announcement and fanbois are probably going to be happy about the warranty. Regardless of the high percentage of problems, most customers - >50% - still have a working system and if they do not, eventually will - for 3 years. If your PS3 dies after 15 months, you suck on it. Eventually, all that matters is the image and how much you think they will do in the future to keep that image up. And I think this is a + for MS in my book.
Atheist: Buddhist in a Prius
"Hello? Microsoft? I have had one of our agents place a flaw in your Xbox 360 video game system. It is a simple flaw, easily fixed, but only if you know what it is. I shall give you this information if you give me ONE MILLION... What was that? Oh, really? That's good to know, thanks. (ahem) I shall give you this information if you give me ONE BIIIIIIIIIILLLLLLLLLLION DOLLARS! Muhahahahahaaaaa!"
#naabhaprzrag, #sverubfr-000, #agi-fcbafberq, negvpyr[pynff*=' negvpyr-ary-'] { qvfcynl: abar !vzcbegnag; }
Yes, it's a major problem, especially for a company that is very used to exceeding their goals.
Assorted stuff I do sometimes: Lemuria.org
Anyway, what is the reason you buy any console? It's the games. I don't buy a console to play music, watch video, or IM. I buy one because I want to play the new high end games and I cannot afford the bleeding edge of high-end PC gaming. Yeah, the Wii is fun for minigames, but not even in the same league as PCs, 360, or PS3. To suggest that it is an alternative to them is totally bogus. I have a Wii that is a lot of fun with company, but not much fun otherwise. It has weak graphics, and it's games by and large have very little depth. It provides a gaming exerience much different than that of the other consoles. For those that want graphics, depth, and powerful AI, the Wii is no substitute.
Why buy a 360? Once again, it's the games, and the cost. Want to play Halo 3, you're going to need a 360, or ruin your powerful PC with Vista. That's a no-brainer. Want to play Dead Rising, Ace Combat 6, Gears of War, Mass Effect, Forza 2, Bioshock, etc.? You're gonna need a 360 for most of them, or PC with a graphics card that costs more than a 360.
The PS3 seems to have plenty of power, but no games to really take advantage of it. Oblivion is the best game the PS3 has, and it plays just as well on the Xbox, and even better on the PC. Other than that, the PS3 has a long list of lackluster titles. With better titles, the PS3 would be a better system, but it keeps missing out on exclusives that really hurt it.
Finally, you have online service and achievement points. Being able to see all your friends on and invite them into a game while they are watching a movie or playing another game is pretty cool, as well are the game demos and extra content you find on Xbox Live. And although you would think those achievement points are just a gimic, and they are, they are a very compelling one.
The 360 has the games and online. Until PS3 can at least come up with some good games, it is a high-priced movie player. If you can afford PC gaming at that level, neither console is appealing.
Just wanted to back you up with some figures on how little of an success that Microsofts Home and Entertainment division is so far (products in the division is Xbox 360; Xbox; Xbox Live; CPxG (consumer software and hardware products); and IPTV).
a rDetail.asp?CIK=789019&FID=1193125-06-180008&SID=0 6-00
The total operating loss for that division for the years 2004 to 2006 is $3.084 billion (yes $3084 million) on a total revenue that was, for those years, $10.133 billion. So they have to turn that divsions average 30% operating loss into a profit and try to recoup those $3 billion. That will not be easy.
Source Microsofts 10-K filed with the SEC:http://microsoft.shareholder.com/redesign/Edg
Um, isn't the console still losing money. I read that MS was aiming for Gaming to be profitable in FY08. With an extra billion dollar hole to dig themselves out of, it might take an extra year, or two to get back to even for them.
It's going to take a lot longer than that.
Before this announcement, they were slightly more than $5 billion in the hole on the Xbox and Xbox 360 together. Now they're approximately $6.5 billion in the hole.
That's a huge amount of money. That's like an entire year's worth of MS Office sales (not profit, sales).
What they're talking about in FY08 is profits going forward. But the Xbox program will not be profitable on the whole for many years, if ever. And it won't even be profitable going forward if stuff like this keeps happening.
What I think is 'odd' [which applied to MS means I think they are lying] is that there was no "pattern' to these XBOX 360 failure for 1.5 years, but one finally appeared in the last 0.25 years. This would make sense IF only a limited batch of them were faulty, but MS extended the warrantee for all 360's, and not just for a batch of 360's within a range of serial numbers.
It must be a design flaw, which the article summary got right (this is one of the few sites I've seen with the guts to say it).
Look at it this way. A certain number of units of any piece of electronics are always going to be defective, no way around it. The average is 5%.
MS is now tacitly admitting that their defect rate is well above 5% - for it to cost them $1.3 billion with only 11 million systems out there, the defect rate must in fact be close to 100%. But even if they're counting on fixing some more conservative number of systems - say 30% - that's still well above the industry average. However you look at it, they're admitting to an "unacceptable" number of defective units, and that can only happen if there's something about the design that's causing it to happen.
What that means is that all Xbox 360's are at risk. It doesn't matter when you got yours; it has RROD potential today, tomorrow, and every day after that. That's the case because all 360's are designed the same way - there hasn't yet been a significant change.
I am curious to see what the 360's made after this announcement look like, side by side with a pre-announcement system. If there is no change, then I think it's safe to say the flaw still exists - and I sure wouldn't buy such a system. If there *is* a change, though, then I think we'll have a clearer idea of what the flaw was... but it'll still take time to know whether or not the fix was effective.
Either way, I'd put off buying a system for at least six months at this point. Let the old units work their way through the system, wait for the new units to prove themselves.