After the news that Xbox 360s were experiencing failure rates of up to 30%, Microsoft has announced they will be extending the console's warranty to three years.

Microsoft acknowledged yesterday that the problem had reached "unacceptable" levels and announced the warranty extension at costs to them of around $1 billion.

Microsoft has extended the Xbox 360 warranty to three years from the purchase date instances where hardware failures are signalled by the telltale red flashing, the "red ring of death" around the console's power button.

Microsoft will replace Xbox 360s for free in those cases, and will refund anyone who has had to pay out for repairs.

Microsoft has not provided technical details about the problems, but said that it has made improvements that will stop the problem in new units.

"We have been following this issue closely, and with on-going testing have 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."