Machinima Settles FTC Case Involving Deceptive Xbox One YouTube Advertising

Xbox One

One of the largest entertainment networks on YouTube has entered into a settlement with the Federal Trade Commission after the independent agency charged it with deceptive advertising.

The FTC settlement documents how Machinima paid “influencers” to promote the Xbox One and several games. The influencers, which run their own YouTube channels as part of the Machinima network, were paid to produce two videos that would paint the Xbox One in a positive light.

According the complaint, Machinima worked directly with Microsoft and advertising agency Starcom MediaVest Group to market the Xbox One. Machinima guaranteed that positive videos would accumulate a total of at least 19 million views in exchange for payment.

A small group of so-called “influencers” — YouTube personalities with a large following — received pre-release Xbox One consoles and games to produce the videos. Two of the influencers received $15,000 and $30,000 for videos that racked up 250,000 and 730,000 views, respectively. A larger group of influencers received $1 for every 1,000 views, maxing out at $25,000 for the entire campaign, which saw over 300 positive videos generate more than 30 million views.

The FTC complaint says that five influencers were given explicit instructions on what to cover in their videos, including mentions of what features they were looking forward to on Xbox One and an announcement that they would be playing the launch title Ryse.

FTC complaint

“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,” said Jessica Rich, Director of the Bureau of Consumer Protection. “That’s true whether the endorsement appears in a video or any other media.”

The settlement does not levy a civil penalty. Instead, it prohibits Machinima from engaging in similar deceptive advertising in the future and requires influencers in the Machinima network to “clearly disclose when they have been compensated in exchange for their endorsements.”

The Machinima YouTube network has over 85 billion views and 482 million subscribers. It is an agglomeration of more than 27,000 separate YouTube channels.

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