Machinima Settles FTC Charges Over Xbox YouTube Endorsements

Video gaming network Machinima will settle allegations that it paid popular YouTubers to post videos promoting Microsoft’s Xbox One without disclosing that they were paid endorsements.

According to the FTC’s charges, Machinima had not informed viewers that it had made payments to some “influential” publishers to post YouTube videos about Xbox One console and games. In the campaign’s first phase, five prominent video gamers were given access to pre-release versions of the Xbox One console and video games and asked to produce and upload two endorsement videos each. In all, it said that 300 videos were uploaded by Machinima’s affiliates, or “Influencers”, through November and December 2013, generating more than 300 million views, speaking favorably of Microsoft without disclosing the company’s financial involvement. The problem here is that the videos never disclosed to its audiences that these were paid endorsements which may have misled them into thinking it was an independent review of the product.

As part of the proposed settlement, Machinima has agreed to “prominently disclose any material connection between the endorser and the advertiser” in future ad campaigns and refuse payment to video makers who don’t include such disclosure.

It isn’t clear how the FTC became aware of the issue surrounding Machinima’s lack of disclosure in XBox One videos, nor if the other influencers who were paid were also scrutinized.

The Federal agency also commented that this practice is common but what separated it from the legally made promotions was the fact that it was put in a way to purposely deceive the public by projecting the notion that it was the YouTubers’ personal opinion not Machinima’s.

While Starcom and Machinima are facing the music, Microsoft themselves are not held accountable. Machinima guaranteed Starcom that the influencer videos would be viewed at least 19 million times.

Back in 2013, Microsoft launched its new Xbox One system and generated significant hype online, but Ars Technica reported in early 2014 Microsoft may have paid for some of this buzz. SkyVSGaming’s Adam Dahlberg was paid $15,000 by Machinima for these two video reviews while Tom Cassell of TheSyndicateProject received $30,000. When they updated guidelines in regards to product disclosures, this required people and companies to be clear when they were paid or otherwise compensated for posting about another product or company.

“Machinima is actively and deeply committed to ensuring transparency with all of its social influencer campaigns…We hope and expect that the agreement we have reached today will set standards and best practices for the entire industry to follow to ensure the best consumer experience possible”.

Starcom MediaVest Group hired Machinima to promote Microsoft’s Xbox and the new games, according to the FTC.

However, the commission found that the events appeared to be isolated incidents that occurred despite procedures designed to prevent such lapses, and noted that the companies quickly required Machinima to remedy the situation.