If you look my record up on the Microsoft customer service database you would likely see a binder's worth of calls, repairs, replacements and other nonsense. I have no problem with a company's products breaking down if they handle the problem quickly and efficiently, which Microsoft often has, but when a single user has owned five different serial numbers you know there is something fundamentally wrong with the system. Now, I don't want to play the role of the whiny blogger, Microsoft has taken care of me very well on several occasions, the thing is they shouldn't have had to.
With an exact installment of an additional heatsink for the graphics processing unit (GPU), it's obvious they were able to precicely diagnose where most problems were coming from. This means that they could have known about it months out of the gate, but chose not to remedy this problem. It's very bad business to have a console with a high-failure rate; repairs are expensive for the company, customers fear purchase and retailers hate returns. It's a losing trifecta that can turn potential investors away because of it's unstable nature. With that in mind I severly doubt that Microsoft intentionally had malfunctioning units, but I think that there may have been some serious issues internally for such a blunder to continue for so long.
The scratched disc issues were fixed quite early when the center began adding foam pads to disc trays that damaged games. Comparitively this is a much simpler fix than the red ring issue. Installing an additional heatsink may not sound like a large feat, but when you are mass producing the units and have to conform to the "double concavic" casing it may be a little trickier working around. I still don't think it should have taken over a year to get this out, but I could understand it taking a short while. Either there must have been serious internal miscommunication for the improvements to be delayed so long or the bigwigs believed if they simply kept throwing enough systems out the problem would work it self out.
The Xbox 360 is an amazing system. It has great games, great features, and a great community. The biggest issue was it's failure rate. The public relations folks at Xbox did an excellent job of keeping this serious problem under wraps. No figures were ever released than the 5% quote they gave after the console's launch and thus noone had any proof. Even with warranty extentions and revisions, which should have been clear indication of the system's issues, the buying public was only mildly aware of the problem and did not stop buying. Now their job becomes quite interesting, with the improvement to the service they will want to make it publicly known the console no longer sufferes from heatstroke, but how do you do that without admitting there was a problem in the first place? Likely this will never be commented on from MS, save a quick one-liner along the lines of "We have improved our service center cpabilities by request of our customers." It's the only way they can boast and save face at the same time
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