A %33 return rate isn't bad... it's terrible
Many Xbox 360's have over-heating problems, and end up requiring repairs -- this is not a big secret. Check out our story on new cooling options for XBox's, for example. However, exactly how many Xbox 360's will self-fry themselves, out of a typical truck load of Xbox's, has not really been looked into -- until now, that is.
Technology news site DailyTech, recently took it upon themselves to investigate Xbox 360 failure rates: they decided to ask retail outlets that offer the Xbox 360 with extended warranties about how many Xbox 360's were returned. Startling numbers came up: it turns out that around a third of Xbox 360's owners with extended warranties returned their consoles to the store, claiming that they were defective.
This whoppingly huge return rate is somewhat higher than than the average "three to five percent" failure rate that has been reported from Microsoft. Some of the outlets that DailyTech recieved information from include North American locations of GameStop and EB Games. A former employee of EB Games, Matthieu (last name withheld), was quoted as saying that out of "35 Xbox 360's at launch I know more than half of them broke within the first six months." Another source from EB Games -- who did not want to be quoted directly --told DailyTech that EB Games reworked its Canadian warranty policies this year specifically to handle with the return-rate of the Xbox 360. Presumably, those returns were getting expensive. EB Games doubled the charge for a one-year, over-the-counter warranty. Whereas before, EB Games exchanged a new console for a busted one, now a customer will get a refurbished console instead.
Another unnamed employee of Best Buy said that failure rates were somewhere between a quarter and a third of all Xbox 360s sold, and then went on to relate: "We see a ton of [Xbox 360s] come back all the time. We strongly push our customers to buy our service plans no matter what they buy, but it is especially important for them with the Xbox 360. . . It's a lucky thing for us that Microsoft extended the factory warranty to one year, because we were having a hell of a time dealing with the launch units."
And the price tag of getting a Xbox 360 repaired isn't exactly cheap: if your one year warranty is up, you could be looking at price tag of a $140 bucks to pay for repairs.
Currently, Microsoft does not officialy disclose any numbers in regards to Xbox 360 failure rates.

And EB has raised the extended warranty charges? Thats a pretty bad sign in itself...
I REALLY hope my 360 doesn't break, though I do believe I got the extended warranty...
i guess microsoft gets special treatment.
Why didn't they pay enough attention to the overheating when they designed it?
Why didn't they recall it when they found a full third of units have overheating problems?
And why haven't they still fixed it on units that are being sold right now?
I guess it just goes to show you Microsoft is a bunch of cheap assholes. How else do you think Bill Gates has so much cash?
Honestly, buy a 360 and water cool it. you could use the hot water to make coffee to keep you up during late night gaming sessions.
Actually, Nintendo is the only console producer that has been making money on consoles sold in the last couple of generations...Gamecube and the Wii both turn a profit...
In any case, yes, MS wanted to have a head start against the PS3, and the Wii...if they didn't, they would probably be mocked, rather then the PS3...
MS is probably losing almost as much, if not more money then Sony because of all the defective consoles that need to be repaired...