You’ve heard me wax poetically about the XBOX 360, the best game console on the market (with all due respect to the Wii).

For those unfamiliar, the 360’s parent company, Micro$oft, has had issues with the system’s hardware, causing many machines to crash and give a solid red ring light around the power button (known affectionately as “the ring of death”).

The reported reasons for the “bricking” (crashing) are varied. From games that tax the system causing overheating to faulty system updates to just general defects, the XBOX forums are full of sob stories and rants of gamers having to send their beloved Boxes in. Both Wolfman and I have had to send ours in.

Initially, every XBOX had a 90 day warranty, which allowed the user to have their Box replaced if the console was defective. However, when the mega-hit “Gears of War” came out, reports of bricking became much more widespread. Complaints were rampant that Micro$oft was screwing the public, turning its back on its customers. Personally, my XBOX return story was quite the opposite. I encountered nothing but politeness from Micro$oft support, received my shipping materials for my Brick, and received my new XBOX back in less than 2 weeks.

Micro$oft seemed to address the problem with the gaming community at large, too. It announced last winter that it was extending the warranty to a full year. Those that had paid to have their XBOX fixed would be reimbursed. It was a nice move by the software giant, and proof that they sometimes considered public opinion and word of mouth more valuble than the quick buck.

Flash forward about six months, and brick reports are now coming in fast and furious again, this seemingly around the release of Forza 2, reportedly their best racing game to date.

Place your bets, place your bets. What will Micro$oft do this time? Give in and extend the warranty or say enough is enough.

If you chose “A”, you’d be right.

Check out this article from the AP: XBOX 360 repairs will cost Microsoft $1B

Microsoft (notice the spelling change) announced yesterday that it would extend the warranty to a full 3 years and repair, for free, any failures. Again those that had paid would be reimbursed. Also in the article are financial reports for Microsoft, that not only will the repairs cost over a billion dollars, but that the entertainment and devices division (aka gaming) has lost $6 billion since 2002. In addition, they’ve lost $315 million in the first quarter of 2007 alone.

First off, cheers to Microsoft. Plain and simple. They’ve stepped up to the plate and delivered in, I think, a big way.

Secondly, are the big losses cause for concern? Should we be worried about the 360 going out of business? Not likely.

From what I’ve read, it takes a video gaming system about 3 years to start turning a profit (the 360 will have been out for 2 years this November). That’s about how long it takes to work out the kinks, and for the system to catch up with the quality of the games. But even those aren’t the real reason not to be worried.

Video game console makers NEVER EVER EVER make significant money on the console itself. For a console that you paid $399 for, it probably cost 75% of that just to make it. The makers turn their profits on the games themselves. New XBOX games usually retail for $59.99, costing $10 or less to make. That’s a 400% profit.

In my XBOX ownership tenure, I of course spent $399 on the console (or rather my wife did…merry Christmas to me!), but I’ve bought about 8 new games at retail prices.

That’s about $480 just in games. I’ve also spent about $100 buying points on XBOX Live for games on their online arcade. That’s close to $600.

And we’re not even close to what most experts think will be the beginning of the XBOX turnaround, and what I think is the real reason behind this extended warranty.

Think hard. Microsoft has to have a more immediate purpose for extending this warranty.

If game sales are the most important commodity they have in trying to turn a profit, then would it not make sense to announce this extension before the release of say a big game, to insure that sales will be as big and brisk as possible.

Still haven’t figured it out?

Halo 3. It’s ALL about Halo.

The sequel to the BIGGEST seller in Microsoft history is due out on September 25, just two months away.

They’re hoping to dwarf “Gears of War” sales numbers, meaning more than 3 million copies, to say nothing of the deluxe editions, manuals, and merchandise they’ll inevitably sell.

Not only will they reap the benefits of the game sales, but more consoles will be bought by people interested just in getting Halo 3, thereby creating a bigger consumer base to market future games to (Gears of War 2 in 2008, anyone?).

It’s the way of the drug dealer, in a sense. You give the user some for free to get him hooked. Fix his 360 for free so he’ll want to keep buying games, and you’ve got him hooked.

Don’t get me wrong. I’m as hooked as the next guy. Halo 3 will be on my shelf in Texas (yep, I’m moving folks) within the first couple days it’s out. I’ll get the Gears of War 2 when that comes out. And probably 3 or 4 games in between. I’m a good little addict that way.

Microsoft did the right thing, but don’t FOR A SECOND think they’re motives were totally benevolent.

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