FTC rules Machinima ‘deceived’ viewers with Xbox One ads

The murky side of YouTube games coverage has been dragged into the light with the confirmation that Machinima paid video makers to make positive Xbox One content without disclosing the deal.

The Federal Trade Commission found that the network paid some YouTubers up to $30k to produce Xbox One videos around the time of the console’s launch. The contracts signed prevented negative discussion. This in itself is not wrong. That the terms of the deal or the fact that the videos were effectively advertising was not disclosed absolutely is, however. The contracts even prohibited video makers from being honest about the terms of their agreements.

The FTC labelled it deceptive advertising”.

When people see a product touted online, they have a right to know whether they’re looking at an authentic opinion or a paid marketing pitch,” FTC’s director of the Bureau of Consumer Protection Jessica Rich said. That’s true whether the endorsement appears in a video or any other media.”

As a result, Machinima has agreed to refrain from such activity in the future and enforce rigorous disclosure agreements with video makers.

But what of Microsoft’s involvement?

As the advertiser, Microsoft bears responsibility for the influencers’ failure to disclose such material connections,” the FTC said. However, upon careful review of this matter… we have determined not to recommend enforcement action against Microsoft.

The failures to disclose here appear to be isolated incidents that occurred in spite of, and not in the absence of, policies and procedures designed to prevent such lapses. Microsoft had a robust compliance process in place when the Xbox One campaign was launched… Since the Xbox One campaign, Microsoft [has] adopted additional safeguards regarding sponsored endorsements.

In addition, Microsoft… took swift action to require that Machinima inserts disclosures into the campaign videos once they learned that Machinima had paid the influencers and that no disclosures were made.”

The campaign itself was broken down into two phases. In the first, Machinima instructed five YouTubers to produce two videos each. Both had to include a montage of Xbox 360 games and mention two or three positive things that they were looking forward to with Xbox One.

Two video makers were named – Adam ‘SkyVSGaming’ Dahlberg, who received $15k, and Tom ‘TheSyndicateProject’ Cassell, who was paid $30k.

In the second phase video creators were paid $1 for every 1,000 views of qualifying videos, with total payments capped at $25k. The contracts specifically prevented participants from disclosing the nature of the agreements.

Over 300 videos were uploaded as part of the campaign.

Microsoft has said of the ruling: "We are pleased that the FTC recognized Microsoft has vigorous compliance processes and procedures for sponsored campaigns."

The Microsoft and Machinima partnership was raising eyebrows as far back as January 2014. At the time both companies described the deal as a typical marketing partnership”.

CAP last month published a set of guidelines that are to be enforced by the ASA in the UK.