Extended warranties are a lot like an insurance policy. Unfortunately for the consumer, they exist to sell you peace of mind, to which they've attached a dollar sign. The general idea is to sell more $ in extended warranties than you pay out in repairs and replacements. It's a gamble.
I never purchase them, and yes, I've had my Xbox fail on me twice, yet I've never once paid to repair it. Microsoft realises that
1) it looks bad when they get a bunch of disgruntled customers who bought a box that was destined to fail early.
2) If my box breaks, and I'm not willing to pay to repair it, I won't be buying any more games, and since they didn't make money on the hardware in the first place.
3) Buying a launch box labels you as an early adopter. Manufacturers live off early adopters, its what makes their standard or format win out, and drives sales. Nobody wants to buy the console that nobody bought.
So, naturally, when I phone them up, they suggest that it will cost ~$150 to repair it. I suggest that they call a supervisor. They come back having talked to the supervisor and suggest I pay $75. I suggest again that I not.
Ultimately, it ends in a postage-paid box being shipped to me, wherein I place my Xbox, along with a little note asking that the drive be replaced by a Samsung (that was the second time)
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