Xbox 360 and the Red Ring of Death

Last week Microsoft announced that it may spend up to $1 billion repairing busted Xbox 360 consoles—and that it's going to extend the machine's warranty from one to three years. The breakdowns are often signaled by three flashing red lights on the the front of the box, a sign known as the "red ring of death." One gamer, Justin Long, has actually gone through 11 consoles, and chronicled his repair efforts with each one. Still, the protests in the gaming community added up, and Microsoft was forced to respond. As Microsoft's Peter Moore, who runs the Xbox program, put it in a letter to gamers: "You've spoken, and we've heard you."

Microsoft hasn't come out and explained any particular hardware fault, and the news caused barely a blip in the company's stock price. This might have something to do with the fact that Microsoft's wallet is brimming with excess cash. A billion dollars isn't that big of a hit. But one analyst also suggested that the repairs might even boost loyalty in the gaming community, leading to increased sales in the long run. Clearly the Xbox 360 has staying power: Even Long, the gamer who burned 11 boxes, says he's still a loyal fan.—Gregory Mone