I spoke with Peter Moore, Microsoft's Corporate Vice President, Interactive Entertainment Business, Entertainment and Devices Division, for a few minutes a little while ago about today's announcement regarding the extended warranty.

The warranty, which gives all Xbox 360 owners a 3-year safety blanket guarding against the dreaded red ring of death, will cost Microsoft more than $1 billion, but Moore said it was about time they stepped up to the plate.

"It needs to be above and beyond because we haven't done what we need to do to take care of our consumers," Moore told me, adding that three years is quite a long time for a consumer electronic.

Moore said the timing of today's announcement, a mere two weekdays before Microsoft's E3 press conference and more than a year after they first addressed the red light issue, was due in part to the company needing to analyze data and figure out the potential cost to the company.

"You gather data... you determine what we have done isn't good enough," he said. "The number of returns we were getting with the three flashing red rings. When we got that data we took this rather unprecedented step."

Moore declined to give any specific numbers for the rate of returns for the Xbox 360, which have been placed at anywhere from 5 to 30 percent, and also didn't want to talk specifics about what changes to the console have been made and are yet to be made to ensure the problem doesn't continue.

"It was a number of problems," he said. "It's not just one systemic problem we are seeing that was causing these three red rings of light... We are always making changes (to the Xbox 360), as we see things we identify the issue, then we make changes to improve the console. And we will continue to make changes with the goal of making (the Xbox 360) a more reliable product."

I pointed out that while the warranty gives Xbox 360 owners a safety net, it doesn't really ensure they won't be inconvenienced with multiple repairs or returns, no matter the cost, but he said gamers shouldn't "have any issues walking into a store and buying an Xbox 360" today.

While this has become an increasingly public black eye for Microsoft, Moore said that consumer satisfaction remains quite high for the Xbox 360.

"You worry about (the backlash from the red light issue). I worry about that, but when we look at our consumers we are almost 90 percent customer satisfaction on the console. As hard as it is to read those letters that say they've had one, two, three break, they also always say 'Can you get my Xbox 360 back to me as soon as possible.'"
Microsoft Expands 360 Warranties [Kotaku]