It was no question 7+ months ago the 360 was plagued with an astounding failure rate of 33% from the infamous Red Ring of Death, the most in console history. But with the Falcon chips implemented it has gone down by half of what it was, 16%. While both Nintendo and Sony consoles was below 1% the least amount in history. However now it seems both those consoles are now at 3% failure rate.
There is no question with excessive amount of usage, any console can have break downs, such as Over-heatings and possible DRE(disc read errors). Which means we may see these consoles getting higher failure rates as time goes by.
There's been a lot of press about Microsoft's red ring problem. Estimates of the problem have been all over the map, and when he was working for Microsoft, Peter Moore referred to them as a moving target. Company estimates pinned it at a fairly normal 3%, while some retailers have put the percentage as high as 1/3 of all systems.
A new report claims the truth is somewhere in the middle. SquareTrade deals in selling warranties for electronics, and has amassed their over 1000 warranty purchases to come up with some interesting data. The findings were a 16.4% failure rate of Xbox 360 systems, versus a roughly 3% rate for the Sony PlayStation 3 or the Nintendo Wii with sample sizes in the high hundreds. The well-known "Red Ring of Death" error accounted for about 60% of those hardware failures, and thus most system-breaking problems are covered by Microsoft's extended warranty plan.
SquareTrade CEO Steve Abernethy speculated that the future may see an even higher percentage. "It is reasonable to believe these failure rates will increase over time, since the Xbox 360 failure issues tend to increase with prolonged use where overheating appears the main culprit," he said. Abernethy went on to note that while the company didn't track the different variations of the 360, he "would estimate most if not all were the original motherboard."