Perspective: Wake up, folks--tech warranties don't need to be lame

Maybe I got sidetracked by the media scrum following Paris Hilton's latest moves. But did someone perform a mass gene transplant on the once formidable American consumer and I missed the news?

Back in the day, all hell would break loose if a manufacturer tried to duck responsibility when one of its products malfunctioned. It was a matter of simple honesty: in return for paying the price of a purchase, a customer was entitled to a fair deal.

No longer.

When it comes to leaving consumers with the short end of the stick, there are few inequities as egregious as the standard warranty terms attached to technology products. For the most part--though not all--you get one year of protection and then you're on your own, Jack. That's fine if your computer or MP3 player performs as reliably as a Toyota, but let's get real here. Few products do.

When it comes to leaving consumers with the short end of the stick, there are few inequities as egregious as the standard warranty terms attached to technology products.

All the more reason I'd like to know when we got turned into a nation of sheep.

It's not unreasonable to expect trouble-free performance from a $1,000-plus purchase. So when glitches crop up, the corporation should stand behind its products. That's not always the case.

In fact, standard warranty protection in the computer business rarely lasts longer than a year. As my Gen-Y nephew is wont to say, "How lame is that?"

Even more baffling is the public's meek acceptance of the status quo. Not long ago, when I mused about this in a blog, one reader countered that one-year protection constituted ample protection and hardly qualified as a "scam."

The post was made anonymously--unless, of course, some rambunctious counterculture couple actually named their spawn "Mergatroid Mania." So it was that "Mergatroid," who said that he (or was it she?) worked in the electronics service industry, suggested that I must inhabit a dream world with like-minded fools.

"A warranty is meant to protect you from defects in workmanship," the Mergster harrumphed. "It's not a guarantee that the goods you purchase will never break down. Being human, we have yet to invent anything that is perfect and will last forever."

Just so happens that I agree with the position. At some point along the line, every fancy tech toy is going to malfunction--if not give up the ghost entirely. Warranties are there to offer security in the event that these contraptions break down sooner, rather than later.

That's why so many people opt to buy extended warranties. In most cases, they're not worth the money. Still, we do it because an out-of-warranty repair is going to cost plenty more--thus adding to the expense in buying a big ticket item. (And even then you may need to spend hours trying to reach someone who can fix your problem, let alone communicate in clear English. But that's fodder for another column.)

Warranty protection also costs a company a tidy sum--especially if its products keep breaking down. The expense can add up. Microsoft recently learned this the hard way, announcing that it would spend more than $1 billion to fix faulty game consoles while also extending warranty protection from one to three years on its Xbox line.

I would have given Microsoft more credit had management started out with offering a three-year warranty as standard fare. Instead, it was classic after-the-fact spin control.

That wasn't the case at a Southern California peripherals maker called Iogear, which has offered a three-year warranty as a way to distinguish the company from the competition. CEO Sampson Yang told me he equated it with granting "peace of mind" to consumers.

Seagate offered up a similar tale. In January, the company attached five-year warranties to its FreeAgent line of external storage products. Brian Dexheimer, who runs sales and marketing, also used the term customer "peace of mind" to explain why Seagate was still willing to shoulder the potential extra expense.

"There's absolutely a cost associated here," Dexheimer said. "The more you extend that warranty, the more you have to put in reserve to account for a (product) failure."

All true. None of this qualifies as charity. Instead, call it enlightened self-interest because Seagate, Iogear and other forward-thinking tech companies stand to get repaid in full, and then some, in the coin of winning customer loyalty.

Doesn't it all come down to a question of fairness? You pay good money for an expensive product assuming you won't get hosed on the transaction (let alone because of the fine print in the contract). When that's not the case, it's all the more galling.

New York Times columnist Joe Nocera recently wrote about how iPhone users will have to mail the units back to Apple to replace the phone's battery. That's not a problem if your phone is covered under Apple's one-year warranty. If not, you'll spend $79 plus an extra $6.95 for shipping (a loaner unit will cost an extra $20).

With some parts of Europe already mandating minimum warranty coverage, how long before some ambitious congressman gets the same idea? That would be too juicy an opportunity to pass up. Especially when the sotto voce message being sent to consumers is: assume the position and like it.

Biography
Charles Cooper is CNET News.com's executive editor of commentary.

More Perspectives

[tektaktyks]

... I'd like to know when we got turned into a nation of sh

"All the more reason I'd like to know when we got turned into a nation of sheep." It was a slow process but i think it started with Berneys ...

[tektaktyks]

typo

*Bernays,Edward

[mmccalpin]

More warranty = more cost

You hit upon the issue clearly when you quoted the Seagate
executive and made clear that more warranty equals more cost.

Manufacturers have correctly noted that most electronics failures
happen very early ("infant mortality") or very late in the product's
use. They have also noticed that consumers are extremely
sensitive to first-cost when selecting an item.

Both of these observations lead them to conclude:

1. The cost to add time to a warranty rises in a roughly linear
fashion, and the benefit to the consumer of the added warranty
falls off rapidly after the early-failure period, so a shorter
warranty is more cost-efficient. Yes, engineers run or influence
a fair number of high-tech companies.

2. The higher cost of a longer warranty will not be borne by
most consumers, so the manufacturer can choose between lower
unit sales or lower margins. Neither is attractive, so a shorter
warranty is likely to lead to higher profit. Finance people run all
the rest of the high-tech companies.

All of this would be in some way reprehensible if we as
consumers did not have a choice, but, as you noted in the
article, IoGear and Seagate have elected to attempt market
differentiation (and presumably higher price) with a longer
warranty. This is as it should be.

The fact that these efforts have not created the next Dell or
Microsoft is the reason that most other manufacturers have
chosen not to follow them.

Whether this makes the mass of consumers "sheep", I cannot
say, but as I appreciate a columnist's need to grab eyes by
taking provocative positions, I can hardly blame you for
interpreting the facts as you you did.

Cheers,
Michael

[GraysonBuzz]

Excellent Analysis

Unfortunately, too many Americans do not appreciate the logic behind most business decisions or the economics supporting such.

[tlmck]

re: Rousing a nation of sheep from slumber

What would truly be interesting would be that if software makers were forced to put their lack of warranty in large bold letters on the packaging rather than in the fine print. A nice big 1/2" or better banner around the top of the package would suffice. IE: "As is, No Warranty".

You would not believe how many people are still unaware that the only valid reason for a software return is a defective disk. The fact that the software does not work on their computer, or is full of bugs, are not a valid return reasons.

[perezme]

Amen, brother

I just dealt with this. I bought an extended warranty on a LCD HDTV with Best Buy. When the TV lost all power, I called and was told it would be 1 month before anyone could come take a look at the TV. When I called the store manager he said he would resolve it, then called back and said the same thing. Then I wrote a letter to corporate customer care. They called me back 10 days later and apologized. Of course, the day of the appointment, no one showed up and corporate care said they could get someone out in another six days. Totally unacceptable. DO NOT buy an extended warranty. Its just not worth it.

[fred dunn]

Extended Warrantees from Retailers...

NEVER...NEVER...NEVER purchase an extended warranty offered by anyone other than the manufacturer. Retailers come and go, with your warranty. On the other hand if you purchase an extended warranty from the mfr and they go out of business you would have no place to get parts from anyway.

The only upside to a store warranty is when they state that if they cannot fix it they will replace it wit a comparable model. I have heard too many horror stories about store-backed extended warrantees to recommend them, that especially goes for automobiles.

When your technician does come out he'll most likely have to order a part (another two weeks) and the quality of technician they are sending is probably going to be sub par so who's to say he's not just "shotgunning" (guessing) at the failed component. If so then the cycle starts all over again and all you have to lean back on is the "binding arbitration" clause in all extended warrantees.

Good luck.

[fred dunn]

Price. Isn't it a shame?

Yes it all comes down to the manufacturers back-end fiscal responsibilities. I ALWAYS look at warranty period as a factor in choosing quality since the longer a manufacturer will warrant their product the more confidence they have in it.
Seagate is a good example of this fact. Seagate drives are known for their long lifetimes and you could purchase an OEM drive with a five year warranty for maybe a few dollars more than some others. On the other hand their external drives only carried a one year warranty, that floored me since I could easily buy an OEM drive and put it in a $35 enclosure. Seagate made the right decision even though external drive do get moved and banged around more than a typical desktop would.
What absolutely kills me is the Computer and Large screen TV manufacturers one year (or 90 day) warranties.
Dell is a prime example of this trend since before they opted to compete with the low-end computer makers they always had a three year warranty. Now their consumer systems carry a standard one year warranty. Now you can upgrade to a 2,3, or 4 year warranty but now you are spending just as much as you would have before they started competing with the low-end mfrs, except no you are almost ensured that the components going into that system are of lower quality/pricing so you will be using that warranty (backups anyone?).
High end flat screen TV manufactures have no excuse for their short warranty since you are spending anywhere from $2000 to $5000. Again though they know that in LCD TVs that the CCFL backlights are going to go out, pixels are going to die, etc. Plasma makers know that brightness levels are going to go dimmer with age and power supplies are going to go out.

For the above reasons I build my own computers and I refuse to purchase a flat screen, especially HDTV since it requires either you get off of cable and get a special antenna or you pay a premium or for a few HDTV channels.

Price is the name of the game but since the same manufacturers that have gotten into the low-end markets don't think that those low end parts are making their way into your higher-end computer.
It's still profitable for a computer mfr to ship out a new drive to you after you have lost all of your data than to install a higher quality part to start with.

I am in agreement with you 100%.

Fred Dunn

[talia_ali]

Changing times

You present a good point. Warranties aren't long enough, and hardware shouldn't break down. However, warranties usually also come with tech support. This makes all the difference, I believe.

Moore's law dictates that processing power of hardware doubles every 24 months. Although some predict that this rate will slow, it's still going much faster than your average automobile development. Most consumers can't keep up with this rate of change in technology. Imagine if a company in 1995 offered a lifetime warranty on a 5 1/4" floppy. The thing might still be sound, hardware-wise, but it's definitely not forward-compatible. It would be like the gas cap on a 1970 Toyota not fitting today's gas pumps. This is a simplistic example, but you could see this same problem in other systems. You can't usually run Windows 4.1 programs in Vista. Not all Xbox games work on the Xbox 360. Part of the limited warranty could be companies trying to save themselves the headache of dealing with customers.

Admittedly, in a perfect world, the only things to claim on warranty would be hardware failures. Living in the real world as we do, everyone is merely trying *not* to assume "the position" - including software companies. For some companies, a lifetime warranty would just be a moral high ground to lean on while they bend over.

[kribor]

Obviously a software person....

Gas caps don't fit gas pumps, they fit gas tanks. Currently, processor speed is doubling on the order of 12 - 18 months, not 24. However, Moore's law fails to take into account the fact that (eventually) physics will get in the way, and that linear relationship will not exist until a faster (non silicon based) technology rears its mug.

Just havin a bit of fun on a Friday afternoon. And now, back to our sponsors...

Of course, there is a simple solution to the problem --- stop buying stuff.

[rodcald]

Tech warranties

And how about those warranties when the manufacturer repairs the failed product? Ninety days is hardly a confidence builder. I will never buy another **** product again, of any kind, after five expensive repairs that were short-lived.

[amigabill]

We aren't all sheep

Look at what happened to Microsoft and the Xbox360 problems. They started out with a standard 90 day warranty, but then exptended it (retroactively even to all previous buyers) to a year. Maybe not up to your standards yet, but people clamored until MS improved things because of a common problem they initially tried to ignore. I suppose that does not happen often enough, but is one data point against consumer ignorance.

[aintnorainbowdorothy]

I'll pay more if -

I'll certainly pay a little more for a part or appliance if it is warranteed for more than a year. A hard drive, 500gb size, is less than a hundred dollars. So if I pay that hundred and get a three-year warranty, much less a five-year, I really don't mind. Extended warranties that can be bought mean to me that the builder doesn't have a lot of confidence in the product. When someone offers a three or five-year warranty that means they fully expect the life of that appliance, be it a hard drive, video card, computer, even a toaster, to last at least that long. I replace HD's every year to year-and-a-half. That's because new ones come out that are better. Same with video cards and other computer components including mobos. For household appliances, that's a different story. But technology in the computer industry moves fast and if a person wants good or great performance he/she will replace parts or computers every year to year-and-a-half. Just ask yourself this question. If you happen to playing WOW, do you want more latency than another player? Of course not, so you pop for the better.

[James Anderson Merritt]

The golden age of Costco...

We got into a habit of buying our electronics from Costco because of what we called "The Costco Warranty." When things broke down in normal usage, sometimes two or three years afterward, Costco would replace them outright with the same model or comparable newer model (if they didn't have the older one anymore). Talk about peace of mind! That "no-hassle" policy kept us going back to Costco, even if they didn't have exactly what we wanted and a competitor such as Circuit City did. The peace of mind was worth that much to us. But in the last couple of years, Costco has tightened up on that policy, apparently because people were abusing it: buying big ticket items and then returning them after days, weeks, or months, to exchange for a more up-to-date (and usually upgraded) model. This is similar to the practice of "buying" an expensive evening gown and returning it a few days later, after attending a party in it.

I understand why Costco changed its policy, but I still lament the change. Even so, "The Costco Warranty" remains a good deal (and I guess you can buy extended coverage from them now, too), but the "Golden Age" has definitely passed.

[kribor]

wait a minute

A guy talking about buying an evening gown and returning it the next day.... The letters T--M--I come to mind. LOL!

[Okie Rick]

NEW Service / Replacement Plans on Amazon

A company called NEW sells extended warranty replacement or service on electronics, appliances, power tools, etc. purchased on Amazon.com.

I recently had a chance to make good on the extended plan I purchased for my Fuji Finepix S9000. Confident that my camera would be serviced & repaired I called NEW at their 24/7 hq and stated my case; all I needed was a copy of my Service Plan, the date I purchased it, a copy of my invoice and the date I purchased the camera and the order numbers - all information that could be looked up in My Account on Amazon.

I bought the camera on May 23, 2006. The Service contract was purchased in September of 2006. Amazon gladly accepted payment from me and passed it on to NEW. When I was speaking with the NEW rep on the phone everything was going just fine until he heard the dates of purchase. Then he hit me with a loophole. Seems you have to purchase the Service plan at least 6 days after but no later than 30 after you purchase the item you are "warrantying". I bought the camera, let the Fuji 90 day warranty pass then bought the extended plan. All sensible I thought.

Noop...can't cover you. But we will refund your $29.95. I'd much rather had my camera repaired.

[GraysonBuzz]

We do not need government involved in this

I find this quote appalling:

"With some parts of Europe already mandating minimum warranty coverage, how long before some ambitious congressman gets the same idea? That would be too juicy an opportunity to pass up."

I would not find that juicy in anyway. We do not need the government interfering in private business. How long a warranty lasts is part of the marketing strategy of the company. You give an excellent example of how warranties can be used for product/service differentiation in Iogear and Seagate. If the market places value in these longer warranties, then these products will benefit from this to the detriment of competing products that do not offer similar protection. Look at how car manufacturers have used warranty protection to promote an image of quality products (Hyundai and Kia) and how many manufacturers are increasing their warranty periods.

Bottomline, let the market decide about warranties. If they matter to people, then companies will get the message and offer longer periods of protection. Yes, there may be more costs, but this is all part of the value proposition. However, please do not get government involved. Government overregulates and interferes with the free market enough, even on issues that much more important than warranty coverage.

[Had_to_be_said]

Yes... We NEED the government "involved"...

...In fact, this type of issue is one of the PRIMARY purposes for "government".

Frankly, it is your apparent-ignorance of history, commerce, business, and "government"... along with such your advocating of such an extremist political-agenda... which I find, simply, "...appalling".

It appears that you are merely, blindly, repeating a too-oft repeated cliche about "smaller government", which completely ignores many well demonstrated realities. Frankly, one of the primary purposes of "government" (especially, OUR, "...government, by the people, for the people") is to SERVE the -people who are governed-. This is most often accomplished by constraining, clearly-demonstrated, abuses committed (against "the people") by powerful special-interest groups. The governments responsibility is also to assure the long-term stability, and expansion, of the society, for the benefit of everyone.

In America, we have adopted a minimalist-approach to achieving those ends (and, I fully agree with this social-philosophy)... however, that DOES NOT mean ANARCHY. Furthermore, a "free market" has NEVER meant that the "government" cannot protect basic consumer rights... which ARE under almost universal-attack at this time (especially, with regards to "technology products"), nor, does basic -capitalism- actually mean that the "marketplace" will somehow, almost magically, correct such ABUSES.

History has shown that this "Laissez-faire" approach, simply does NOT WORK to the benefit of society, as a whole. And, in fact, it actually has been proven to be extremely-destructive to any, over-all, economy ...in the long-run.

We need a balance. This "balance" is sorely lacking these days, ...with powerful business-interests being given almost unlimited reign (by the current, business-can-do-no-wrong-as-long-as-it-makes-a-buck, and business-should-be-left-absolutely-alone, political-system). This, selfish, extremist-philosophy has created the environment, in which we currently find ourselves. Namely, many big-business interests (technology, software, so-called "Intellectual Property distributors", etc.) simply refuse to abide by, even the most basic, responsibilities to their customers.

Any system can, and most probably will, be abused... over time. However, "government" IS the tool we (as Americans) use, to establish both order, and balance. Today, that balance HAS been seriously undermined (if not destroyed, completely). And, it is time, once again, that the "government" (as a tool of "the governed") began serving everyone... NOT just, narrow, childishly self-absorbed, and ultimately self-destructive, BIG-BUSINESS interests.

[whozzit]

Government...

Anyone got a problem with government regulation? You better take another look. The government deregulated the gasoline industry in 1980 to bring back the "good old days" of the gas wars. That was a pretty smooth move. Regular costs $3.69 a gallon around here now.