Known for making online videos regarding games, Machinima agreed to settle FTC charges that it hadn’t informed viewers that it had paid some influential publishers for posting videos about Xbox One, Microsoft’s latest generation console and some of its games. On Wednesday, the Federal Trade Commission said that Machinima, which was classified as an early leader in the multi-channels network, had paid publishers as part of a marketing campaign that was conducted by Starcom MediaVest Group, Microsoft’s advertising agency. Starcom had been guaranteed by Machinima that there would be at least 19 million views of the ‘influencer’ videos, as per the FTC.
Somewhere around January 2014, bloggers began to complain about the misleading nature of the campaign. At that time, Machinima had said that it had a typical marketing agreement with Microsoft. However, later, it was added that channel partners are usually required to disclose any promotions. Early access to the Xbox One was provided to the influencers, along with some videogames. In its complaint, the FTC said that the influencers had then been asked to post endorsement videos for payment ranging between $15,000 and $30,000. Five influencers had been paid by Machinima who made around 300 YouTube videos during November 22nd and December 31st, 2013. Collectively, around 30 million views were garnered by these videos.
The regulator said that the influencers weren’t required by Machinima to disclose that they were being paid for the endorsement. This is the first time that charges have been filed by the FTC over undisclosed paid involvements that concern online video reviews. But, according to a spokesman, charges have been filed relating to similar marketing arrangements that concern tweets. A senior lawyer for the FTC, Richard McKewen said that consumers want to know if they are watching a paid endorsement or a genuine review. Based in Los Angeles, Machinima runs a network of around 25,000 creators whose videos about comic books, games and other aspects of pop culture show up on YouTube and other media platforms.
It is one of the few multichannel networks, which also includes Maker Studios, the company that Walt Disney Co agreed to acquire for $500 billion in March 2014. Founded in 2000, Machinima has around 90 employees and it says that its videos get around 154 million unique views in a month and nearly 4 billion views are attracted monthly worldwide. Most of Machinima’s revenue is generated via advertising. Under the settlement with FTC, Machinima has to ensure that influencers disclose when they are paid for making endorsements.
Mr. McKewen said that no financial penalties will be paid by Machinima in the settlement, but future violations could make the company vulnerable to fines. In an emailed statement, Machinima said that the incident mentioned in the FTC complaint is before a management change made in March 2014. It also said that they were committed to ensuring transparency in all their campaigns. Starcom and Microsoft had been sent letters by the FTC stating that inadequate disclosures was the responsibility of companies. On 26th August, letters were sent to both for closure of the investigation and Machinima was asked to deal with the situation.