GameStop and EB Games no longer offer in-store warranty of Xbox 360

Selling extended warranties is often a major source of profit for electronics retailers. Termed “product replacement” or “product service” plans, store employees are incentivized to push such added costs to the consumer – though most savvy buyers hardly ever give in to such pressures.

It’s not unheard of that an extended in-store warranty saves the day for a customer’s broken product, but clearly the odds are in the retailer’s favor – that is, of course, unless a given product has an abnormally high failure rate.

The Xbox 360 may be one such product that exhibits such a high failure rate that a corporation would deem it unprofitable to offer cover under its own policies. GameStop recently issued a memo to its stores instructing workers to stop selling the product replacement plan (PRP) for new Xbox 360 purchases.

The store operations memo, as hosted by GamersReports, reads: Effective immediately GameStop will no longer offer PRPs on new, refurbed, and used Xbox 360 systems. When prompted by the POS ‘Do you want a PRP plan added to this purchase,’ please press ‘Escape’ and DO NOT offer PRPs to customers purchasing an Xbox 360 system. Customers purchasing a new Xbox 360 system will still receive a 1 year manufacturer’s warranty from Microsoft.

Phone calls to various GameStop and EB Games stores in San Francisco confirmed that the new policy was already well-known by store workers. GameStop will still offer product replacement plans for the PlayStation 3 and Wii, both of which also come with a one year manufacturer’s warranty.

found during the investigation into the 33 percent failure rate of the Xbox 360 that EB Games, a chain owned by GameStop, early in 2007 nearly doubled the prices of its one-year, over-the-counter warranty. Even with the price increase, it appears that GameStop feels that covering the Xbox 360 to be an unworthy risk.

At the time of the Xbox 360 launch, Microsoft supplied only a 90-day warranty with its console. More than a year later, Microsoft boosted the warranty to one year to better match-up with the warranty terms offered by competitors.

Quickly following widespread reports that one-third of all Xbox 360 units fall to the dreaded Red Ring of Death, Microsoft extended its warranty to cover the specific hardware failure for three years from purchase.

In addition to the upgraded warranty coverage, Microsoft has also been making hardware changes in hopes to improve the reliability of its console. In June, Microsoft introduced a revised cooling design with heatpipe and heatsink to cool the GPU. Word also came of new “Falcon” hardware that would include 65nm chip technology, which was later found to apply only to the CPU. Hardware to integrate a 65nm GPU, codenamed “Jasper,” isn’t due until August 2008.

65nm “Falcon” consoles flocked to consumers during late September, which proved with its smaller die and heatsink that the newest hardware revision will run cooler. Despite Microsoft’s efforts in improving its manufacturing process, GameStop’s decision to stop selling its PRP shows a vote of non-confidence in the current reliability of the Xbox 360.

"I mean, if you wanna break down someone's door, why don't you start with AT&T, for God sakes? They make your amazing phone unusable as a phone!" -- Jon Stewart on Apple and the iPhone

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