Allegedly Machinima held a promotion around the release of the Xbox One, telling its creators they would get extra money if they would promote the gaming console in a positive light via their channels. If that wasn’t shady enough, the creators were not allowed to mention the payola-style endorsement to their subscribers.
Well, news of the promotion didn’t quite stay under wraps like Machinima evidently hoped and the Federal Trade Commission, the regulatory body for matters of consumer protection, got involved, leading to a settlement of sorts today that holds Machinima responsible for “deceptive practices.”
The FTC released a statement on the matter saying “Under the proposed settlement, Machinima is prohibited from similar deceptive conduct in the future, and the company is required to ensure its influencers clearly disclose when they have been compensated in exchange for their endorsements.”
“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.”
According to the government body’s release on the matter, the scam ran like this: In the first phase of the marketing campaign, a small group of influencers were given access to pre-release versions of the Xbox One console and video games in order to produce and upload two endorsement videos each. According to the FTC, Machinima paid two of these endorsers $15,000 and $30,000 for producing You Tube videos that garnered 250,000 and 730,000 views, respectively. In a separate phase of the marketing program, Machinima promised to pay a larger group of influencers $1 for every 1,000 video views, up to a total of $25,000. Machinima did not require any of the influencers to disclose they were being paid for their endorsement.
While it does not appear Machinima will have to pay any financial restitution, any further failure to disclose promotional incentives could cost the MCN up to $16,000 per violation.
Not exactly chump change. Microsoft, while found culpable in the scheme, was not punished.