In an extremely well orchestrated interview hosted by IGN’s Ryan McCaffrey during E3 week, Xbox boss Phil Spencer, Peter Moore and Seamus Blackley, one of the creators of the original Xbox, sat down to talk about the history of the Xbox console. Peter Moore worked for Microsoft from 2003 to 2007, overseeing games for the Xbox platform. In the interview, he recounts the background events involving the famed Red Ring of Death.
For those who may not remember this scenario, launch Xbox 360 consoles were prone to breaking, and would indicate their fault by way of flashing quadrants of light on the power button. Two bars generally meant a loose connection, but three flashing red lights meant..well, time for another Xbox 360 console. Microsoft had no quarrels replacing broken Xbox consoles, but it certainly cost the company a lot of money in the long run.
“We were seeing failure rates and starting to get reports through customer service,” Peter Moore said. “This was a thing where we couldn’t actually figure out what was going on.
“We knew we had a problem. 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.”
The towel trick came about, with the idea of melting certain parts of the console back together, to ‘weld’ the damage, although this caused even more problems, and was seen as more of a troll fix, than an actual fix. And what about the cost of such replacements around the world where the Xbox 360 was available?
“The moment I’ll never forget, I said to Robbie, we’ve got a business review meeting in Building 34, with Steve Ballmer. I said, we’ve got to tell Steve, here’s what we have to do: we need 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, Dennis Durkin (now the Chief Financial Officer of Activision), Doug Ralphs (then Senior Director of Finance at Microsoft’s Interactive Entertainment Division)… $1.15bn, right out there. I always remember $240m of that was FedEx. Their stock must have gone through the roof for the next two weeks.
“And, I am trembling sat in front of Steve, who I love to death, but he can be an intimidating human being. Steve said, ‘okay, talk me through this.’ I said, ‘if we don’t do this, this brand is dead. This is a Tylenol moment.'”
Moore continued: “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, and saying, ‘we think it’s $1.15bn, Steve.’ He said, ‘do it.’ There was no hesitation. I’m thinking, I’m about to crater Microsoft’s stock. Actually, nothing moved.”
“I’ll never forget that moment,” he continued. “If you’re an Xbox gamer, you can thank Steve Ballmer for not even hesitating. 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.”
You can listen to the full podcast here, which is just short of two hours.