I'm with NJ5 on this one. The Red Ring of Death (if I remember the abbrevation correctly) is not really a big reason for most people not to buy an Xbox 360. People may be aware of it, but the percieved quality of a console is not based on how long it holds together or how well built it is, but on the experiences it produces.
You do not buy a Playstation 3 because it's a good piece of hardware that will last. The same way you do not avoid buying an xbox because you think it might break down.
This is the main reason I do not think that the sales for Microsofts console would be much higher if it had not had this breakdown problem.
Besides, the Playstation is still lagging behind 5 million or so (too lazy to actually calculate the correct number), and xbox sales are up by a lot from the last generation (25 million or so then, total, right?). So I cannot say rushing it out there was really such a bad move.
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