When Microsoft launched the Xbox 360 back in late 2005, the console was greeted by both rapt enthusiasm from the gaming community, but also a chorus of peristent complaints the video game consoles were prone to failure. In response, in December of 2006 Microsoft extended the warranty on Xbox 360 consoles from 90 days to one year; now, the "unacceptable number of repairs" to Xbox 360 consoles has caused Microsoft to extend the Xbox 360 warranty to three years—and take a hefty blow to its corporate wallet as a result.

"This problem has caused frustration for some of our customers and for that, we sincerely apologize," said Robbie Bach, president of Microsoft’s Entertainment & Devices Division, in a statement. "We value our community tremendously and look at this as an investment in our customer base. We look forward to great things to come."

Under the warranty extension, Microsoft pledges to repair or replace any Xbox 360 console which manifests the "three flashing red lights" error message—also known as the "red ring of death"—within three years from the date of purchase. The repair or replacement will be carried out free of charge, and Microsoft will even pay for shipping. The Redmond software giant is setting aside $1.05 to $1.15 billion to pay for the program, and will retroactively reimburse customers who’ve already paid for repair expenses incurred by the "three flashing red lights" error.

Microsoft has previously characterized the failure rate of Xbox 360 consoles as "routine," but unconfirmed reports from retails have put the failure rate of Xbox 360 consoles as high as one quarter or one third of all units sold, and the London Times is reporting that some UK-based repair centers are so overwhelmed with returned units they are refusing to repair Xbox 360 consoles, with some units being sent to Prague for repair.

Microsoft has not publicly commented on the cause of problems with the Xbox 360 consoles, saying only it has "identified a number of factors which can cause general hardware failures" and is making improvements to the console in addition to extending warranty coverage on units already in consumers’ hands.