Yesterday, Ars Technica reported on an interesting story (that began in a NeoGAF thread) highlighting the thin line between paid advertising and original content. Microsoft and Machinima have been engaging in a quiet promotional campaign for the Xbox One: Machinima's video partners get an extra $3 CPM (cost per mille, meaning they get an extra $3 per thousand video views) if they feature Xbox One content on their videos. To qualify for the campaign, Machinima partners had to include 30 seconds of Xbox One game footage, mention the console by name, and include the tag "XB1M13".
Microsoft's campaign ended after a total of 1.25 million views, totaling a pay out of $3,750. That's not a huge amount of views spread across multiple YouTube videos, which is why the campaign started on January 14 and ended on January 16.
As Ars Technica points out, the practice feels shady as hell, but on the surface it appears perfectly normal. Paying for promotion is just advertising; the problem surfaces when you look at the leaked legal agreement behind the promotion. The agreement states that participating partners "may not say anything negative or disparaging about Machinima, Xbox One or any of its games in your campaign video." Again, not entirely unexpected for a paid promotion, recalling the situation with Riot Games and its Pro League of Legends players. The real kicker is this section:
"You agree to keep confidential at all times all matters relating to this Agreement, including, without limitation, the Promotional Requirements, and the CPM Compensation, listed above. You understand that You may not post a copy of this Agreement or any terms thereof online or share them with any third party (other than a legal or financial representative). You agree that You have read the Nondisclosure Agreement (attached hereto and marked as Exhibit "A") and You understand and agree to all of terms of the Nondisclosure Agreement, which is incorporated as part of this Agreement."
That's basically saying that Machinima partners cannot disclose the fact that Microsoft is paying them at all. That section puts Microsoft's campaign into illegal territory, as the Federal Trade Commission requires full disclosure of paid advertising in editorial content.
"When there exists a connection between the endorser and the seller of the advertised product that might materially affect the weight or credibility of the endorsement (i.e., the connection is not reasonably expected by the audience), such connection must be fully disclosed," reads the relevant section of the FTC guidelines.
Essentially, if you're getting paid, then you need to let your viewers or readers know. That's why larger websites or blogs have to mark certain editorial content as "Sponsored Posts", like the pictures below. It's a pretty ironclad rule. Campaigns like this are happening because marketing firms are trying to make ads not look like ads. They want you to hear seemingly genuine endorsements from people you trust, but the FTC wants to make sure that consumers aren't misled.
The agreement was leaked by user ReconXBL, who noted that this isn't the first Machinima campaign like this; there have been similar campaigns for E3, PAX, and San Diego Comic-Con. ReconXBL says that not every YouTube video that uses the XB1M13 tag is getting paid, only 80 videos were submitted after their creators signed the agreement.
"I wanted people to understand the significance of the campaign tag in these type of YouTube ad campaigns that will surely become more and more popular as time goes on," wrote ReconXBL in a blog post. "But I also wanted people to figure out what I couldn't, which was the part of the agreement that seemingly flies in the face of FTC guidelines regarding paid endorsers admitting that they're being paid to endorse a product."
"I hope that Microsoft modifies their agreement to state that the YouTuber must verbally state in their video that they're part of an ad campaign. That's what people want, and that's how it should be, anyway. I'm not saying it shouldn't be that way. I'm just saying that the campaign tag is there for a reason and people should become accustomed to it because these type of ad campaigns aren't going away."
There's been no clarity on whether Microsoft was aware of the legal agreement, or if that's just Machinima's normal legal documentation for such campaigns. Neither Microsoft nor Machinima have commented on the situation.
UPDATE: Machinima has told IGN that the legal agreement in question was their standard documentation with no input from Microsoft.
"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," Machinima said in a statement.