The Federal Trade Commission has filed a complaint against the multi-channel network Machinima for their endorsement program in regards to the Xbox One launch. Machinima is accused of having their contracted YouTube Content Creators present the Xbox One in a positive light prior to launch without acknowledging to their viewers that it was a paid endorsement.
The FTC claims that Microsoft paid Machinima to have five select YouTubers to create videos that shows the Xbox One in a positive light, but unlike other works by those creators Microsoft had the power to take down a video they did not approve of. Some big YouTubers was given the Xbox One early as part of the endorsement deal.
The FTC claims that YouTubers were used as an advertising medium on a venue where no one realized they were being advertised to. Five content creators were shown to have made a lot of money from this deal. YouTuber, Tom Cassell of TheSyndicateProject, received $30,000 for two videos. Adam Dahlberg of SkyVSGaming was paid $15,000 for his two videos.
The FTC has issues with the phrasing of the endorsement program set forth by Machinima to its content creators. Machinima is accused of having a contract that stated those participating must not disclose the details of the deal, and the nature of the endorsement to their viewers.
Considering YouTuber’s words in these videos were expressed as opinion, and therefore neutral even though they were paid endorsements – the FTC is being very tough on Machinima for these practices. The FTC accuses the content network of deceptive advertising practices, failure to disclose compensation for endorsements, and false and misleading representation of seemingly impartial statements.
According to the FTC website, Machinima could be fined up to $11,000 for each violation. So if you add up the ten phase one deals that had the lump summed paid to a five big YouTubers, and the 300 videos uploaded during the general phase where other Machinima partnered YouTubers participated in – Machinima could owe more than $3 million in fines to the FTC.
Microsoft themselves is not apart of the fines. They are not responsible on how the endorsements were presented. They just paid for the endorsements. It was totally Machinima’s responsibility to ensure the endorsements followed all laws.
Due to this all coming to light, many other Multi-Channel Networks have discontinued similar programs, and some are planning a reworked version where disclosure will be mandatory. So, what are your thoughts? Leave them in the comments.