Microsoft's Peter Moore has apologised to Xbox 360 owners in an open letter which reveals more details of a new extended warranty plan.
In the letter, Moore acknowledged for the first time that Microsoft had "identified several factors that can cause a general hardware failure indicated by three flashing red lights on the console".
"To address this issue, and as part of our ongoing work, we have already made certain improvements to the console," he continued.
"As of today, all Xbox 360 consoles are covered by an enhanced warranty program to address specifically the general hardware failures indicated by the three flashing red lights on the console. "This applies to new and previously-sold consoles."
Taking responsibility for the problem, Moore noted that the company would also "retroactively reimburse any of you who paid for repairs related to problems indicated by this error message in the past".
Microsoft will repair any console that displays the three flashing red lights error message free of charge, including shipping, for three years from the date of purchase.
"In doing so, Microsoft stands behind its products and takes responsibility to ensure that every Xbox 360 console owner continues to have a fantastic gaming experience," said Moore.
Robbie Bach, president of Microsoft's entertainment and devices division, has also issued a statement: "This problem has caused frustration for some of our customers and for that, we sincerely apologise."