FTC Spotlights The Reputation Hole Machinima Dug For Itself With Undisclosed Paid Xbox Pimp-Posts

from the here's-a-shovel dept

Way back in early 2014, we wrote about the revelation that Microsoft and Machinima, the popular YouTube network, had worked out some kind of arrangement in which the newly-released Xbox One would get positive coverage from Machinima personalities. Likewise, Machinima's agreements with its own personalities leaked, laying out just exactly how those personalities would be compensated for pimping the Xbox One without ever informing fans that they were doing so. This, at a very minimum, was an existential gamble wagering the trust Machinima had built for itself amongst fans for the chance at some dollars from Microsoft. It was a bad wager. Once this all became public, I'm struggling to understand why anyone would put an ounce of trust in the Machinima outlet at all.

And now the FTC is involved, taking the time to ding Machinima for the behavior and enjoining it to never do anything similar in the future.

In a press release today, the FTC announced that the two parties have come to a settlement that will prevent Machinima from pulling this sort of shadiness again. Writes the FTC: “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.”

The FTC also cited specific examples of Machinima's actions, including naming personalities that were involved, helpfully torpedoing those personalities' ability to get fans to trust them in the future.

Respondent paid influencer Adam Dahlberg $15,000 for the two video reviews that he uploaded to his YouTube channel “SkyVSGaming.” In his videos, Dahlberg speaks favorably of Microsoft, Xbox One, and Ryse. Dahlberg’s videos appear to be independently produced and give the impression that they reflect his personal views. Nowhere in the videos or in the videos’ descriptions did Dahlberg disclose that Respondent paid him to create and upload them. Dahlberg’s first video received more than 360,000 views, and his second video more than 250,000 views.

Respondent paid influencer Tom Cassell $30,000 for the two video reviews that he uploaded to his YouTube channel “TheSyndicateProject.” In his videos, Cassell speaks favorably of Microsoft, Xbox One, and Ryse. Cassell’s videos appear to be independently produced and give the impression that they reflect his personal views. Nowhere in the videos or in the videos’ descriptions did Cassell disclose that Respondent paid him to create and upload them. Cassell’s first video received more than 730,000 views, and his second video more than 300,000 views.

The FTC then goes on to expose the entire deal Machinima had with Microsoft's advertising group, Starcom, which included an initial roll out of paid positive coverage by a few personalities, but was then to evolve into a Machinima-wide program of paid-for positive coverage of the Xbox One, with payments to be based on traffic/views.

This, it should go without saying, was insane. In the arena of YouTube personalities in general, and perhaps more specifically with the gaming fanbase and the culture that surrounds it, you simply cannot gamble with your reputation and expect the reward to be worth it.

Filed Under: disclosure, ftc, paid placement, payola, videos, xbox
Companies: machinima, microsoft, youtube

How Payola Works Today... Or Why You Only Hear Major Label Songs On The Radio

from the who-listens-to-radio-any-more? dept

Over at the Tunecore blog, former Rykodisc President George Howard has a post up explaining how payola works today in the world of major labels and radio stations. While I know that a large percentage of folks reading this here are rushing to the comments to declare "ha! who listens to radio any more!" the fact is that a ton of people do, and for the major labels, it's still a key (if not the key) way to "break" an act. And even though the labels keep getting dinged every decade or so for payola, the process never seems to change much, other than greater efforts to separate out the transactions so that the record labels can pretend that they're not bribing radio station employees, even though everyone knows that's exactly what's happening:

Getting a song “added” to a station’s playlist to get a certain number of plays per week involves a rather byzantine process that brings in various parties, called independent promoters (“indies”). These “indies” are first paid by the label. It’s important to note that the money the indies receive isn’t necessarily compensation paid directly to them for getting Program Directors to get a song played. Rather, they work more like an intermediary to pass the label’s money to the radio station. These indies, with the money paid to them from the labels, pay the radio station money for various listener give-aways, bumper stickers and so on. To top it off, these very same indies are often also paid a second time by the stations themselves as a consultant to advise the stations on what songs they should play.

Because of this, the major labels absolutely dominate radio airplay. Independent labels could try to hire the same indie promoters, but won't get the same attention anyway:

Here’s why: You’ve come to these indies, and they’ve gone to the labels, and they’ve taken your money, and they know that you’re probably not coming back any time soon. On the other hand, the majors are coming every week with money and new artists. Who would you prioritize if you were in the indie/radio station’s shoes?

Now, as Howard notes, and many of you probably have already realized, this is not a sustainable system. Because if radio keeps playing crappy songs based on bribes rather than quality, in an age where there are greater and greater alteranatives, the system won't hold. More and more people will go elsewhere, where there's more choice and fewer guys with briefcases full of cash making the decisions.

If you're wondering exactly why the labels have been trying to shut down popular hip hop blogs recently, look no further than this story. Such blogs have really become "the new radio" for creating hits for the younger generation. But, unlike the old radio, the major labels don't "control" these blogs in the way they control radio. While some of it may just be the left hand not knowing what the right hand is doing, there are at least some who see this as an opportunity to "regain control." Forcing blogs offline and/or trying to significantly limit them is a pure power play by the labels against hip hop blogs. It's got nothing to do with copyright or being worried about someone's songs leaking. It's why the RIAA is out there sending takedowns on music that a Universal Music employee purposely put online for free.

Now I've said before that I'm not convinced that payola for radio play is necessarily wrong or bad. A play on radio is effectively a commercial for that music/musicians. And paying for commercials is (obviously) fairly common. Is it really so crazy that some in the industry want to "buy" spots? I get the argument concerning the lack of transparency. And, in fact, as technology becomes more widespread, and as the next generation of services launches, radio stations are going to be forced to move away from payola not because they don't like the practice... but because people won't be relying on radio so much for leaning about new songs. For the time being, it's likely that these kinds of situations will last. But consumers just aren't going to stand for it that much longer.

Filed Under: major labels, payola, radio

Payola Scandals Show Why Performance Rights Tax Makes No Sense

from the reverse-economics dept

We've pointed out in the past what a ridiculous contradiction it is that Rep. John Conyers has both fought against "payola" and argued for a performance rights tax on radio at the same time (even going so far as to make the argument that a lack of such a tax was the equivalent of slavery). This, of course, makes no sense. Basically, when left to the actual market, the RIAA implicitly admits that it's quite valuable for musicians to get on the radio: that's why it pays radio stations so often. The whole point of the Performance Rights tax is to force the economic equation in the opposite direction. The RIAA (and SoundExchange) insist the Performance Rights Tax is necessary because radio doesn't have the same promotional value it once had -- but if that's the case, why do labels keep on paying money under the table for payola deals?

Apparently yet another payola case was just settled, leading Ars Technica to not only point out that this undermines the RIAA's entire basis for the Performance Rights tax, but to highlight the payola deals that have come to light over the past few years:

Sony was busted (and paid out much more) for even more egregious violations back in 2005. Sony's promoters went so far as to tell radio stations that the "real people" (they were planted) calling in to request songs had to be more convincing.

"As for Saturday nights, you need to rotate your people," said one message from a promoter. "My guys on the inside say that it's the same couple of girls calling in every week and that they are not inspired enough to be put on the air. They've got to be excited. They need to be going out, getting drunk, or going in the hot tube [sic], or going clubbing... you get the idea."

Later that year, fellow major label Warner Music paid out $5 million to make its own payola problems go away.

In 2006, the world's largest music label, Universal, paid $12 million for a long history of payola. As the New York Times noted, the payola could take many forms, including trips and baseball tickets.

"In April 2004, Universal provided Mr. Michaels--by then a programmer at WHYI-FM in Miami--with a New York hotel room and New York Yankees tickets. The company booked the room under a false name and used a false Social Security number to conceal the transaction, the document states."

Finally, in mid-2006, the last major label, EMI, settled its own payola charges by paying $3.75 million in fines.

In 2007, the broadcasters were busted. CBS, Citadel, Clear Channel, and others paid more than $12 million and signed similar anti-payola consent decrees.

It's hard to believe that anyone takes the RIAA seriously when it claims that radio stations don't provide much promotional value to artists when at the same time the RIAA labels keep funneling cash to radio stations under the table to get them to play their music. Pretending that it's somehow not just fair, but "morally" correct, to force radio stations to pay for the right to promote the RIAA's music, is really impressive from a "that takes guts" standpoint. But it's difficult to believe that anyone who isn't receiving a paycheck from the RIAA can actually support that position with a straight face.

Filed Under: payola, performance rights

Rep. Conyers Compares Lack Of A Performance Right Tax To Slavery

from the sing-along-now dept

We thought it was crazy enough when an RIAA-organized lobbying group called radio "a form of piracy" because it didn't pay musicians to promote their songs. But it appears that Rep. John Conyers, one of the biggest backers of forcing radio stations to pay an additional tax to help promote music, has taken it a step further. Via Copycense we learn that at an event put on by recording industry lobbyists, Conyers decided to compare the lack of a performance right mandatory fee for radio stations to slavery and indentured servitude. Seriously:

"In 1865, slavery was abolished by the 13th Amendment. No more free labor," Conyers said. "It abolished at the same time involuntary servitude. What does that have to do with what we're here for today? Well, when you tell somebody that you're benefiting from their work product but there's no avenue for compensation, it kind of harkens back to that great problem."

What an incredibly shameful thing to say. Beyond making the absolutely bizarre and ridiculous connection between the failure of one giant industry to force another big industry to hand over a chunk of cash (most of which never will be seen by any musicians), it ignores basic economics. Historically, the money has flowed the other way. For decades, record labels and promoters have used forms of payola to pay radio stations to play certain musicians. Why? Because they clearly knew that they got a ton of value out of those songs being promoted on the air. Songs on the radio are advertisements. What kind of industry gets Congress to force broadcasters to pay to run their advertisements -- and then has the gall to have an elected official claim that not paying to play these ads are the equivalent of indentured servitude?

Of course, Conyers knows all about Payola. Back in 2002, he was the one who called for payola hearings on Capitol Hill. So how is it that he suddenly thinks that money not going the other way is somehow "no avenue for compensation"? He's being blatantly intellectually dishonest here. Is it worth mentioning that in the last election the two largest contributors to his campaign were lawyers and the Music/Movie/TV industry?

The performance right tax is not about "indentured servitude." It's not even about people benefiting from a product where "there's no avenue for compensation." Quite the opposite. Getting your music on the radio is a huge challenge for most artists, and if you can get your music heard that way, it's still a huge boost to a musician's career. Does Conyers think that when there's a popular commercial on TV that people want to see that the makers of that commercial are "slaves" because they're not getting paid every time the commercial is played? It's yet another example of corrupt politicians in DC pushing legislation that helps one particular industry, and making up completely ridiculous arguments to support their position. This isn't about slavery or indentured servitude. It's about Congress granting a huge mandatory windfall to the record labels (at the expense of radio stations) because those labels are unwilling to actually do something to properly capitalize on free promotion from the radio stations.

Filed Under: copyright, john conyers, payola, performance rights, performance rights act, performance tax, radio, slavery
Companies: riaa

Comparing File Sharing To Payola: Could Have Had That Promotion For Free

from the failure-to-engage dept

BullJustin points us to a short NPR piece about four massive failures by the recording industry. If we skip over number 3 (Kevin Federline), the other three are pretty relevant to what we talk about here on a regular basis: the Sony BMG rootkit fiasco that opened up security holes on computers without letting anyone know, the RIAA's lawsuit strategy of suing fans and the record labels' ongoing efforts at payola to get songs played on the radio.

However, BullJustin makes an amusing point in the submission concerning that last one:

It cost the industry untold millions in actual payola, independent promoter fees, and then more than $25 million in settlements, not to mention lawyer fees. If they would have just let people share the music online, the marketing they were looking for could have been free."

It really does make you wonder what goes through the minds of record label strategists. They tossed away millions paying people to get music heard, when they could have just embraced file sharing and made it cheaper and easier to get music heard without running into the legal problems of payola as well. Of course, the problem with that plan is that the labels also lose "control." They've paid to get songs on the radio because they wanted to just focus on a small group of artists who they could squeeze for as much profit as possible, dumping all the rest. File sharing makes it harder and raises the possibility that other artists might also get heard.

Filed Under: file sharing, music, payola, promotion

Lack Of Indie Music On The Radio Perhaps A Matter Of Economics More Than Payola

from the thinking-this-through dept

The UK-based musicians lobbying group Featured Artists Coalition has apparently released a report noting that very little independent music gets played on the radio. I imagine this should surprise... well... none of you. The report appears to suggest that the issue is payola -- the practice of record labels paying radio stations to get certain music aired. The FCC had cracked down on payola (for the umpteenth time) in 2007, but the report says the mix of indie vs. major label music on radio stations has barely budged.

I'm sure that's true, but I'm not at all sure it has anything to do with payola. I'd bet it has a lot more to do with two things: basic economics and the rise of alternatives such as the internet and satellite radio. Based on these things, and the limited number of radio stations out there in a given region, it only makes sense that those stations would gravitate towards music and formats that bring in the largest, most mainstream audience. That's just basic economics. Playing just indie music attracts a smaller audience, and it's tough enough to survive as is.

That said, it's not clear this is really a problem. Those of us who tend to like indie music more had already moved away from terrestrial radio long ago -- and thanks to the internet, podcasts, MP3 players and other alternatives, have no problem hearing the music we like. Yes, there are still a lot of people who listen to terrestrial radio, and those stations do still have some influence on what's popular, but it's hardly the cultural juggernaut it was not so long ago.

Filed Under: economics, indie music, music, payola, radio

Congressman Buys Recording Industry Argument That Radio Is Piracy

from the and-here-we-go-again dept

For pretty much the entire history of radio, everyone has known that getting your songs played on the radio was promotional. It helps sell albums. It helps sell concert tickets. There is no better way to prove this than to just look at the history of "payola" whereby record labels would pay radio stations to get their music heard. Obviously, the recording industry put tremendous value into being on the radio and was willing to pay for the privilege (even if it was illegal). In the US, radio stations have to pay royalties to composers and publishers -- but not performance rights to the musicians. That's because Congress also recognized that radio was a benefit to those artists.

Yet, in the last few years, with the recording industry execs desperate for more cash and unwilling to embrace business models that actually take some work, they've been running to Congress demanding that radio stations now pay performance rights to the labels. They even came up with a silly study that attempted to prove that radio play decreases sales. Late last year, it got so silly that one of the recording industry's many lobbying groups, called musicFIRST, claimed that radio is a "form of piracy." musicFIRST has been hiring big name lobbyists, like former House Majority Leader Dick Armey to push this view, and (of course) some politicians have obliged.

Rep. John Conyers has once again introduced a performance rights bill which is mistakenly described as creating "parity." It's only "parity" if you think that doubling the tax on playing music on the radio is "parity." This is, once again, nothing more than the recording industry trying to get the government to force others to hand over money, because the labels are too lazy (or clueless) to learn how to embrace some of the new business models that are earning musicians plenty of money. And Congress has no problem helping to prop them up.

It's worth noting, of course, that among the top contributors to Rep. Conyers recent re-election was the American Intellectual Property Law Association as well as DLA Piper, the big law firm that (oh look!) Dick Armey has been working for... It's also worth pointing out that Conyers, as head of the House Judiciary Committee, just so happened to have recently abolished the subcommittee on intellectual property -- which (hmm...) would have almost certainly been chaired by Rep. Rick Boucher, one of the few folks in Congress who actually has been known to fight for the rights of consumers, and against the RIAA, when it comes to copyright. This gave Conyers, rather than Boucher, control over new IP related legislation.

Filed Under: john conyers, payola, radio, recording industry, royalties
Companies: musicfirst, nab, riaa