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Update: FTC Censures Machinima Over Failure to Disclose Paid Xbox One Endorsements

The United States Federal Trade Commission has today slammed multi-channel network giant Machinima over a ‘deceptive’ campaign it ran to encourage its partners to promote Microsoft’s Xbox One console.

According to the official report the FTC released today after conducting a substantial investigation, in mid-2013 Machinima “submitted a proposal to Starcom and Microsoft to market the Xbox One and the launch titles on [Machinima’s] YouTube network…. [Machinima] proposed leveraging a group of ‘influencers’ that [Machinima] could ‘incentivize to create content’.”

Basically, the report lays out that Machinima allegedly took some of its personalities and had them make Microsoft specific content in return for money or other incentives. While there isn’t a problem with that, per se, the personalities never told their viewers they were sponsored by Microsoft. The report continues, saying that “[Machinima] entered into a written agreement with Starcom to provide advertising on behalf of Microsoft as outlined… [Machinima] promised that the influencer videos would ‘not portray Microsoft, Xbox One or the launch titles in a negative manner.'”

Supposedly, Machinima “recruited five of its influencers to produce and upload two video reviews each”. In these videos, the content creators were tasked with talking about what they were looking forward to about the Xbox One, showcasing early access gameplay of hack-and-slash title Ryse: Son of Rome, and ultimately, portraying Microsoft products in a positive light. To do all this, Microsoft provided Machinima and its broadcasters with Xbox One consoles and copies of Ryse, with the corporation reviewing and approving the videos before they were published.

The most damning piece in the whole report is that Adam Dahlberg was paid $15,000 for two videos reviews on his SkyVSGaming channel, in which he spoke favorably of Ryse and Microsoft. Tom Cassell of TheSyndicateProject received $30,000, for which he spoke similar praise. The biggest problem is that in those videos, the two creators made it seem like they were airing their own personal views; in reality, they were approved by Microsoft first.

Eventually, Machinima promised to “pay each influencer $1.00 for every 1,000 views, up to an aggregate cap of $25,000 for the entire campaign.” Altogether, the FTC states that Machinima “has represented, directly or indirectly, expressly or by implication that video reviews of Microsoft’s Xbox One and the launch titles reflected the independent opinions of impartial video game enthusiasts.” The statement continues: “In truth and in fact, the video reviews for Xbox One and the launch titles did not reflect the independent opinions of impartial video game enthusiasts… [the influencers] created the video reviews as a part of the global advertising campaign to promote sales of Xbox One and the launch titles.” All in all, it concluded that the practice was “false and misleading”.

Machinima could be fined up to $11,000 for each violation, and with more than 300 videos uploaded in total, the total penalty could reach more than $3 million. Machinima earlier released a statement regarding the matter:

“Machinima is actively and deeply committed to ensuring transparency with all of its social influencer campaigns.  Through collaboration with the FTC, we are pleased to have firmly resolved this matter, related to an incident that occurred in 2013, prior to Machinima’s change of management in March 2014. 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.”

The full FTC report can be read online.


Microsoft has issued a statement about the FTC investigation, stating “We are pleased that the FTC recognized Microsoft has vigorous compliance processes and procedures for sponsored campaigns.” Machinima and the FTC have made a deal, resulting in Machinima not having to pay fines. Machinima will be required review its partners videos to make sure there are proper disclosures. They will also have to do surprise reviews of videos and must keep five years of review records per a monitoring program established by the FTC. In three months Machinima are required to present a plan to the FTC for monitoring and the settlement will be in effect for 20 years. For more details, click here.

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