Week of July 1 — 7, 2007
- Microsoft Extends Warranty to Three Years for Xbox 360 Consoles Afflicted by Three Red Lights
- Circuit City Weekly Circular Reveals $100 Price Drop on PLAYSTATION 3
Microsoft announced this week that they will be extending the warranty to three years for any Xbox 360 consoles afflicted with a general hardware failure, as indicated by the three red lights. In addition, the warranty would be offered retroactively to customers who have already had their consoles repaired by offering refunds for any out-of-warranty repairs that have been paid for. The announcement was accompanied by an open letter from Peter Moore and a posting on Gamerscore blog. An analyst conference call with Microsoft executives, transcribed by Joystiq, provided more detail as well. As part of the announcement, Microsoft also revealed that they would take a $1.05 billion to $1.15 billion pre-tax charge in fiscal fouth quarter as part of the warranty extension.
The announcement was far and away the discussion with the highest volume among the community this week both because of the nature of the warranty and, subsequently, the implications of the pre-tax charge Microsoft will take. Initial reactions from bloggers and the community were mostly positive at Microsoft’s move to reassure their existing customer base, exemplified by comments such as “Classy show, Microsoft. Real classy. Let’s hope this move is coupled with hardware revisions to keep your customers — and shareholders — happy.” from Joystiq. However many did say that they felt it was about time for Microsoft to address the growing discussion and media attention the console was garnering in recent months as pointed out by Chris Kohler over at Game|Life where he states that it looks “like this issue finally caught up to Microsoft. With a renewed interest in the problem and E3 coming up, they couldn’t just continue to deny that it exists.”
Community members on forums also felt the apology and warranty was an unprecedented move by Microsoft in support of their customer base and that, given the consistent denials of any issues present in the console in the face of media inquiries for the past year or more. Over on the massive NeoGAF thread, posters were initially happy about the news (“Wow, didn’t expect this. Even an apology. Pretty good! Clever that they did this before E3.”) and felt that they could “game without fear” now. One poster did some “napkin” math and using the (obviously flawed) calculation of dividing the $1 billion charge by $400 for each console, theorized that Microsoft expected upwards of 2.5 million consoles rendered inoperable by the three red lights. Curiously this figure was later cited on at least one mainstream news story. Later on, discussion turned more cynical on how Microsoft either had to have been aware of the issue for a significantly longer period than they had let on and that the warranty was only now extended because the bottom line and increasing customer dissent had forced Microsoft’s hand — in addition to some speculating that this move could pre-empt any class action lawsuits that may have been pending. As time passed since the announcement many, such as Xbox 360 Fanboy, began to wonder if this move was enough to instill confidence in those who have been disheartened by or even dissuaded from the Xbox 360 console due to the reports of hardware issues.
It’s clear that regardless of where the discussion lay or what the nature of the discussion was, a large majority of the community felt very passionate on their views and what they felt they deserved out of both the console itself and from Microsoft given the announcement of the warranty extension. Writing on Aeropause, George Walker summarized the dissenting views among the community in a post titled “Microsoft Warranty Fallout (not the good kind)” by stating
What makes the mistake into a full-blown failure is when you strive to cover it up, pretend like nothing is happening, and then after months and months of ignoring the issue, then you finally decide to do something about it, only after it becomes obvious that it’s hurting your bottom line. See, if you were smart, Microsoft, you would’ve realized a LONG time ago that it could’ve been addressed for much cheaper than $1 billion if you had done so a YEAR AGO.
That’s what you get for trying to screw over your customers. Thanks for playing.
The announcement was picked up widely across the blogosphere this week by blogs such as Joystiq, Kotaku, Destructoid, Evil Avatar, Engadget, Gizmodo, Xbox 360 Fanboy, Aeropause, Game|Life, Ars Technica, Siliconera, GayGamer.net and Cathode Tan.
A reliable forum member of the Cheap Ass Gamer (and DVDTalk) forums posted information from an upcoming Circuit City weekly circular which revealed that the chain would be selling the 60 GB model of the PLAYSTATION 3 at the reduced price of $499 on July 12, down from the $599 price point the console was released at in November 2006.
The circular and the subsequent scan of the circular (as posted by Kotaku) grabbed a significant amount of attention as many bloggers and community members have long griped about the high-price of the PLAYSTATION 3 console. Many have also felt that the exceptionally low monthly sales for the console as reported by the NPD Group is a clear result of the high price point. As a result, the price cut elicited an overwhelmingly positive reaction from the community as they felt Sony was beginning to understand what would make them be more competitive against two lower priced consoles in the marketplace. Many feel that this will help sales for the console a little, but at $499, the PS3, as one member on NeoGAF states, “will have a really nice price for what it offers. Still probably won’t be cheap enough for the masses to bite, well, en masse.”
The price cut was confirmed late Sunday night via a Sony press release which also announced a new, albeit limited edition, variant featuring a larger hard drive (80 GB) and Motorstorm bundled into a $599 package.