FTC: Machinima Made Misleading and Illegal Xbox One Advertising

YouTube network Machinima has paid YouTube channels up to $30,000 to make positive statements about the Xbox One as part of a marketing deal with Microsoft. This is according to a study by the US Federal Trade Commission.

The FTC rules that Machinima was guilty of misleading advertising. The stories about this have been doing the rounds since early 2014. The YouTube network immediately paid a settlement to the FTC. As part of the settlement, Machinima is prohibited from repeating such practices in the future. The company is also obliged to report through its channels when sponsorship is involved.

The marketing deal dates back to 2013, around the time of the Xbox One’s release. Machinima is one of the largest networks on YouTube, funding and supporting thousands of YouTube channels. For the money, Machinima’s YouTube channels would only make positive statements about the Xbox One and its titles, and would use pre-release gameplay footage from Ryse: Son of Rome, among others. The YouTubers were contractually prohibited from stating that the videos were a paid promotion, and the videos come across as containing the honest opinions of the filmmakers. Between November 22 and December 31, 2013, Machinima is said to have uploaded more than 300 videos as part of this campaign.

Only two YouTube channels are named in the FTC’s report: Adam “SkyVSGaming” Dahlberg, who allegedly received $15,000, and Tom “TheSyndicateProject” Cassell, who collected $30,000 for his contribution. In addition, three more channels are said to have received such amounts for the production of two videos promoting the Xbox One, which were presented as personal opinions of the creators. None of the five informed viewers that it was a paid promotion.

In a second phase of the marketing campaign, Machinima sourced channels from across its network of thousands of creators. Any video that was, among other things, at least 60 seconds long and showed 30 seconds of gameplay footage of an Xbox One title within the first two minutes, was eligible for payment. For these videos, the creators were paid $1 per 1000 views, with a maximum of $25,000. More than 300 videos were uploaded during this phase and together they were viewed more than 30 million times. In this case too, makers were not allowed to disclose that they were paid for the promotion.

Microsoft and marketing company Starcom are involved in the case, but have not been cited by the FTC. The two companies are said to have complied with all marketing regulations of the FTC and the FTC sees Machinima’s actions as “isolated incidents”, the committee said in a letter to Microsoft. In addition, Microsoft and Starcom are said to have taken immediate steps to ensure that Machinima notifies viewers through its channels. In addition, they will keep a closer eye on their contracted marketing campaigns in the future.

The FTC says to Polygon that it is the first time that the committee has made such a statement about advertisements on YouTube. “When people see a product advertised online, they have a right to know whether they’re listening to someone’s honest opinion or a marketing pitch.”