Public Relations Nightmare: Microsoft's Xbox 360 (Pierce Mattie Public Relations New York)

You know you are admist a public relations nightmare when it is the height of the holiday shopping season and one of your high profile products is making news for being defective. There is no denying that Microsoft potentially has a public relations crisis on their hands. Vista was a debacle, but now Microsoft is facing yet another issue just weeks before Christmas as word continues to spread about the Xbox 360's "red ring of death." While Microsoft has put aside a billion dollars to extend warranties to fix the issue, is it really enough to remedy what seems to be an unfixable issue?

Having experienced the red ring of death myself and promptly sending my Xbox 360 back to Microsoft, I have to say that the timing couldn't be any worse. With a little more than 3 weeks left until Christmas, Microsoft told me it could take 4 weeks to fix my Xbox. What does this mean for Microsoft? For myself, and I'm sure for many other Xbox owners, that means there'll be no money spent on Xbox products this holiday season. Words Microsoft doesn't want to hear as Sony just launched its PS3 and Nintendo's Wii sales are going strong.

Just as the MAC commercial mocking PC's need for a PR person says Vista users switching back to XP are "Upgrading to an older, more familiar experience," will 360 owners be "upgrading" to the original Xbox or abandoning ship and taking the PS3 or Wii for a spin with their holiday cash? Either way, with a class action lawsuit looming, I have to wonder what PR tactics Microsoft will be using to take the focus off of these issues to restore consumer confidence in their brand.

According to Jim Goldman of CNBC's Tech Check, Blogger complaints about the Xbox 360 has had no bearing on sales, and in fact reports that Microsoft's sales for 360 are up. Could this be due to the Xbox issues not being mainstream knowledge or simply consumers brand loyalty? Frankly, I had no idea that the Xbox 360's cooling system was defective until I saw fellow blogger, Jason Bean of "The Unauthorized Microsoft Weblog" in a report on CNBC that aired today. The issue certainly wasn't relayed to me when contacting Microsoft support about my Xbox (as I am sure they meant to keep it that way).

I decided to ask Jason's perspective on the situation. I wanted to find out how Microsoft can play down the bad press regarding defective 360's and rebuild consumer confidence in the Xbox brand, as well as, after all of the bad press Vista has gotten, if there was a more negative feeling about Microsoft now that their Xbox 360 is also having issues and how if affects their overall image.

Jason Bean, The Unauthorized Microsoft Weblog:
That's a tough question. I'd shared my thoughts on the class action lawsuit as being similar to Jim Goldman's from CNBC. I'm not sure the lawsuit itself has much validity as I don't think there's really a problem with Halo3 separate or in conjunction with the Xbox 360 problem. I believe the real impact of the lawsuit is going to be on image and financial costs of trying to repair that image.

I think the first thing they should start doing is replacing the overheated Xbox's with the new production units instead of refurbished ones. I see the problem with that is that if people know you can send you old 1st gen Xbox in and get a brand new, everyone will be doing it, even if they have to intentionally overheat the machine to force the red lights. If Microsoft denied people for that, more negative backlash, so I can see them basically having to replace the entire population of 1st gen boxes. If any company on the planet has the money to do that it's Microsoft, but that's still going to be an expensive check to write.

Perhaps another "good will" gesture would be a coupon or credit for Live merchandise or maybe even a single game coupon from your preferred retailer. Still pricey in the end, but maybe cheaper than the previous option. Maybe you replace a 1st gen box with a new production unit only with an individual that's had multiple failures.

The other thing that's been interesting for me is the number of people who still say they're buying Xbox's instead of the competition and are proving it with their wallets. This was shared in some of the follow-up story done by CNBC. That tells me that the people who have Xboxes are loyal customers for the most part.

I'm not sure how much worse Microsoft's image can get at this point than what they've already come through. I'll agree that Microsoft has it's problems and there are a variety of things they could do to begin to start turning the ship around. However, I also believe they've got the biggest target on their back right now because they've got the biggest "back" in the industry.

I'd love to hear your thoughts on this issue, what steps can be taken to salvage their image for holiday sales and into the new year?