Most Xbox 360 owners have had a brush (or two…or three…or more) with the console’s infamous Red Ring of Death (RRoD) error. Former Microsoft executive Peter Moore stated early on in the console’s life cycle that the failure rate was in the single digits. Retailers eventually said it was as high as 33 percent. A 2009 Game Informer poll put it at 54 percent. Microsoft never released a specific number — but it never disputed even that obscenely high Game Informer figure.
Whatever the exact percentage was, it was high enough to require action — the kind of action that Moore and the Xbox finance team in 2007 estimated would set Redmond back $1.15 billion. That’s a lot of money, even for Microsoft. But, according to Moore’s comments on a recent IGN podcast, it was money well spent. Moore, now the COO of Electronic Arts, said on the podcast that there would be no Xbox One had then Microsoft CEO Steve Ballmer not approved the expenditure.
“We knew we had a problem,” Moore told IGN. “I remember going to Robbie Bach, my boss, and saying, I think we could have a billion-dollar problem here. As we started to do the analysis of what was going on, we were getting the defectors in, it was a challenging problem for our engineers, and we couldn’t quite figure out what it was. We knew it was heat-related. There were all kinds of fixes. I remember people putting wet towels around the box.”
Microsoft couldn’t figure out what the problem was, but Moore knew the console holder had no choice but to do right by its customers. All he had to do to make it happen was convince the imposing Steve Ballmer to part with $1.5 billion of company money.
Moore stated that he’ll “never forget” the moment he told Robbie Bach, who was the head of Xbox at the time, that the two men had to relay a proposed solution to Ballmer. That plan was “to FedEx an empty box to a customer who had a problem – they would call us up – with a FedEx return label to send your box, and then we would FedEx it back to them and fix it. Either keep your hard-drive or send it to us.
“I calculated with my finance team… $1.15bn, right out there. I always remember $240 million of that was FedEx. Their stock must have gone through the roof for the next two weeks.”
Moore recalls “trembling” in front of Ballmer during the meeting in which he and Bach asked their boss for the money. But the former Microsoft CEO didn’t squawk at the proposal.
“Steve looked at me and said, ‘What have we got to do?’ I said, ‘We’ve got to take them all back, and we’ve got to do this in a first class way,’ because when you take a console away from a gamer, and you’re going to spend three weeks fixing it… so we’ve got to FedEx this all the way. We’ve got to FedEx this all the way. We’ve got to overnight it back in two.
“He said, ‘What’s it going to cost?’ I remember taking a deep breath, looking at Robbie [Bach], and saying, ‘We think it’s $1.15 billion, Steve.’ He said, ‘Do it.’ There was no hesitation.
Moore thought the move would “crater Microsoft’s stock.” In actuality, it did not.
“If you’re an Xbox gamer, you can thank Steve Ballmer for not even hesitating,” he added. “Now, we were a wealthy company who could afford to do that, but not even hesitating because the brand was more important.
“If we hadn’t made that decision there and then, and tried to fudge over this problem, then the Xbox brand and Xbox One wouldn’t exist today.”
Moore recounted the problem and Microsoft’s inability to figure out exactly what was causing it being a “sickening” experience.
He remembered Microsoft Hardware Engineer Todd Holmdahl “going crazy” trying to figure the thing out. They theorized that it was related to changing the solder that held the system’s GPU and fans in to lead-free in order to accommodate European regulations had something to do with it. But they didn’t know. It was just a theory.
“We knew it was heat-related” asserted Moore. “We think it was somehow the heat coming off the GPU was drying out some of the solder, and it wasn’t the normal stuff we’d used, because we had to meet European Standards and take the lead out.”
In any case, Moore reiterated that had Ballmer not given the green light to Moore’s repair program, “Xbox One wouldn’t have happened.”
But because Ballmer gave his approval, Xbox, a brand Moore estimated is now worth “three or four times” the $1.15 billion Microsoft spent on RRoD fixes, endured.