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Microsoft and Electronic Arts Catch Heat for Advertising Practices

http://www.fool.com/investing/general/2014/02/01/microsoft-and-electronic-arts-catch-heat-for-adver.aspx

Keith Noonan
February 1, 2014

There's no question that online gaming has drastically reshaped the industry. It is certain to be one of the defining elements of the interactive medium as it continues to progress. Whereas videogames were often thought of as largely solitary sources of entertainment, there is now a large social component to the gaming industry. Entities like Twitch.tv and Machinima have emerged to take advantage of and foster these trends by trying to make spectatorship a bigger part of the gaming business and culture. For the time being, these efforts are proving largely successful.

With the popularity of gaming streams and user-posted videos at an all-time high, it's not surprising that companies like Microsoft (NASDAQ: MSFT) and Electronic Arts (NASDAQ: EA) are looking at this boom and seeing the potential for new methods of promotion and advertisement. The introduction of these strategies looks to generate ongoing controversy in gaming communities. User-generated content is still relatively new terrain and acceptable methods for corporate promotion exist in an apparent state of flux. Will these new methods of promotion become an important part of advertising in the gaming industry, or will they prove to be more trouble than they're worth?

Some opinions pay better than others
Microsoft recently partnered with Machinima for a small promotion that offered members of the video channel the opportunity to earn extra revenue. In exchange for creating content that offered either a positive or neutral stance on the Xbox One, Machinima users had the opportunity to gain an additional $3 on every 1,000 views generated. In order to be eligible for the promotion, users would also have to include at least thirty seconds of Xbox One game footage and include a search tag specific to the campaign. Considering that Machinima typically pays its partners around $2 per 1,000 video views, Microsoft's promotion represents a sizable opportunity for channels that have a large viewer base. Machinima even issued a statement that claimed the Microsoft "bonus" was the easiest that it had ever offered.

Much ado about $3 per 1,000 views
News that Microsoft was partnering with Machinima for these promotions spread through enthusiast gaming communities like wildfire. This has prompted outrage and raised questions about the ethics and legality of the deal.

As per the terms of the agreement, users cannot speak disparagingly of the Xbox One and are also forbidden from revealing that they are participating in the promotion. Some have raised the issue of whether this violates FTC provisions regarding disclosure of endorsements, but it's unlikely that there will be anything in the way of consequences.

The truth is that this sort of thing happens frequently in the gaming industry. Comparable exchanges occur with large media outlets and nary a disclosure is given, so the expectation that there will be legal recourse for deals made through Machinima content creators is likely misplaced. Given enough Internet outcry, future deals may be approached differently, but you can expect this broader practice to stick around. Apparently this particular round of promotions has drawn to a close, but more are likely to follow.

Not the only one
Electronic Arts is testing similar waters with its own promotional campaigns. The recently leaked details of its efforts show that those who pr