A new report by Dean Takahashi, the author of Opening the Xbox and The Xbox 360 Unlocked, concludes that Microsoft knew that the Xbox 360 had a 68% failure rate at launch, but were unwilling to stop production on the console. The decision to keep plowing ahead and get the defective Xbox 360s out early added up to over one billion dollars worth of extended warranties and fixes. Also according to Takahashi, the decision crippled Microsoft’s ability to price the console as “aggressively” as they would have liked.

Takahashi’s biggest bang in his new report is wrapped around an anonymous source who said that Microsoft were adding “too many features after things were locked down” and added “[t]hat incremental feature adding just made [the Xbox 360] fragile.” The report then claims that Microsoft went ahead with the production process, despite a 68 percent defect rate.

In the end, Takahashi concludes that the issue has cost Microsoft more than repair money. It cost the publisher the ability to push a price point to compete with the Wii. He states, "The quality problem negated much of the advantage of going first, and it has delayed the company's plan to aggressively market the console and slash its prices.”

While I can’t argue that it was a terrible business decision to go ahead with such an astounding defect rate, what was with all the surprise when people first started reporting all of the failures around launch? I find it hard to believe the Peter Moore could feign complete ignorance of the issue so long, so well. Do you guys think this is as insidious as Takahashi claims? How many Xbox 360s have you gone through?

[via 1UP]