Microsoft Pays Machinima Creators to Promote Xbox One (UPDATED)

/ Jan 20, 2014


UPDATE: We’ve received a statement from Machinima, which might diffuse any concerns over whether the Xbox One marketing campaign violates FTC rules. The statement follows our original post:

Microsoft’s Xbox One is locked in a heated battle with Sony’s PS4 for bragging rights in the console market. So it shouldn’t be surprising that, as part of the larger marketing plan, either company would enlist online “influencers” to get the word out about how great their respective console is.

In fact, that’s exactly what Microsoft is currently doing. Via a partnership with Machinima, Microsoft has been reaching out to gamers affiliated with YouTube to help promote the Xbox One — though the companies are going about it in a way that may not exactly comply with FTC guidelines for product promotion.

A quick primer: According to some documents leaked online by YouTubers, Microsoft and Machinima are offering creators a bonus $3 CPM ($3 for every thousand views) for videos promoting the Xbox One and games for the console. As part of the campaign, which was supposed to run from January 14 to February 9, creators would have to include 30 seconds of gameplay footage, ostensibly highlighting the title and the console in an organic way.

Here’s where it gets a bit tricky: The agreement requires that the creators do not say anything “disparaging” about the Xbox One, Machinima, or any of the titles featured in the video. On top of that, in order to get paid, creators are not allowed to disclose that they are getting paid to talk about the featured title or the console. This goes against the FTC’s guidelines for public endorsements, which require the party endorsing a product to disclose if they were paid to do so. Per the guidelines:

“For purposes of this part, an endorsement means any advertising message (including verbal statements, demonstrations, or depictions of the name, signature, likeness or other identifying personal characteristics of an individual or the name or seal of an organization) that consumers are likely to believe reflects the opinions, beliefs, findings, or experiences of a party other than the sponsoring advertiser, even if the views expressed by that party are identical to those of the sponsoring advertiser. The party whose opinions, beliefs, findings, or experience the message appears to reflect will be called the endorser and may be an individual, group, or institution.”

It’s not illegal for a creator to get paid to talk about a product — that’s Advertising on YouTube 101. But if creators are promoting a console or title simply to get compensated for it, even if they don’t particularly like the console or title they’re talking about, then there could be an issue.

As luck would have it, FTC’s guidelines also cite an example that almost exactly refer to the situation here:

“Example 7: A college student who has earned a reputation as a video game expert maintains a personal weblog or “blog” where he posts entries about his gaming experiences. Readers of his blog frequently seek his opinions about video game hardware and software. As it has done in the past, the manufacturer of a newly released video game system sends the student a free copy of the system and asks him to write about it on his blog. He tests the new gaming system and writes a favorable review. Because his review is disseminated via a form of consumer-generated media in which his relationship to the advertiser is not inherently obvious, readers are unlikely to know that he has received the video game system free of charge in exchange for his review of the product, and given the value of the video game system, this fact likely would materially affect the credibility they attach to his endorsement. Accordingly, the blogger should clearly and conspicuously disclose that he received the gaming system free of charge. The manufacturer should advise him at the time it provides the gaming system that this connection should be disclosed, and it should have procedures in place to try to monitor his postings for compliance.”

In the end, it’s a small amount of cash for either company. According to Ars Technica, the campaign is already over as Microsoft and Machinima had capped the campaign at a total 1.25 million views. That equals out to less $3,750 paid to creators who participated in this campaign.

Some will find no issue with Microsoft or Machinima’s tactics for this campaign, while others will be put-off by the non-disclosure agreement. What’s more clear is how this speaks to the way brands are approaching YouTube. There are a lot of creators, with huge followings, who are more than happy to work with brands to advertise their products. Yes, the general belief is that it’s important to allow creators to maintain their own voice and relationship with their audience. But if creators are willing to promote a brand and have no qualms with a non-disclosure agreement such as the one used in this situation, then what?

Here’s a statement from Machinima:

“This partnership between Machinima and Microsoft was a typical marketing partnership to promote Xbox One in December. The Xbox team does not review any specific content or provide feedback on content. Any confidentiality provisions, terms or other guidelines are standard documents provided by Machinima. For clarity, confidentiality relates to the agreements themselves, not the existence of the promotion.”

This seems to clearing up that grey area with the FTC. Based on the statement, it appears creators were allowed to mention that this was part of a paid promotional campaign, as long as they didn’t divulge specifics about the agreement. As noted earlier, this is pretty standard fare on YouTube, and puts the onus on the creators to be forthright about how they feel about the product they’re advertising. If they choose to lie to make a quick buck, it’s on them.

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