After months and months of speculation, consumers complaining on message boards, and flat out denials by Microsoft, today the company has admitted that its initial production run of Xbox 360 hardware may have been faulty.

GameDaily BIZ has received tons of reader e-mail on the subject, with many consumers complaining that they're already on their 2nd or 3rd Xbox 360. In addition, last month an EA employee claimed that the failure rate of Xbox 360 consoles at his studio was in the range of 30 to 50 percent, although MS denied this account. And more recently, we heard from another video game studio (that wished to remain anonymous) claiming that out of about 200 Xbox 360s, roughly 35 percent had died. These studios, however, almost certainly got their systems around launch, and that's precisely why they and other early adopters have been having difficulties.

An MS spokesperson told GameDaily BIZ today, "Yes, it is true. As part of our standard and ongoing process of analyzing repair data, we recently noticed a higher than usual number of units coming in for repair. Upon further investigation, it was further discovered that the bulk of the units were isolated to a group that was part of the initial manufacturing run of the console. Returns for repair are coming in for a variety reasons and it's a higher rate than we are satisfied with."

The MS representative could not provide us with an exact figure for the failure rate, but it's clearly above the three to five percent range that MS had been claiming originally. As such, the company also revealed that in an effort to make amends with consumers, it will compensate those consumers who bought an Xbox 360 prior to 2006 and have had trouble with the machine. "We've made the decision to comp repairs for consoles manufactured before January 1, and provide refunds to the small group of customers who have already paid for repairs," the rep explained.

Microsoft also stressed to us that this should not be considered an extended warranty of any sort and it does not apply to Xbox 360s produced in 2006.

Cynical industry watchers have said that MS should have addressed the hardware failures months ago, but at least the company is doing something about it. Of course, if they continued to ignore the situation there could have been a class action lawsuit in the works.

Nevertheless, it's not surprising that the company's initial production run of hardware had problems. Early adopters often get the shaft this way because they pay more and it usually takes some time for the manufacturing process to work out the kinks. The Xbox 360 certainly isn't the first complex electronics device or video game console to experience early malfunction issues.