The dreaded “Red Ring of Death” is the most well-known and publicized system error for the Xbox 360. One lesser known, but still common enough defect is the Xbox 360’s nasty habit of scratching discs while inside the console, creating another undesirable type of ring of death.
According to a blog post on the Seattle P-I, Microsoft was supposedly aware of this hardware fault even before the system’s launch in November 2005. This was uncovered in newly unsealed documents (PDF) with declarations of Microsoft employees.
A Microsoft program manager was quoted in the declaration saying, "This is ... information that we as a team, optical disc drive team, knew about. When we first discovered the problem in September or October (2005), when we got a first report of disc movement, we knew this is what’s causing the problem."
The big issue was that the Xbox 360 would scratch discs if the console was moved with a disc spinning inside. Microsoft allegedly knew about the issues and considered three possible solutions, but none of which were put into place.
Microsoft has faced several lawsuits, the most recent one earlier this month, for scratched discs. More than 55,000 complaints are on file regarding the disc scratching issue, according to the P-I’s inspection of the motion.