Xbox One Scandal Comes At Challenging Time For YouTube

YouTube has long dominated the online video market and might seem to many internet users as impregnable, much as Yahoo! once was, however the Xbox One advertising scandal couldn’t have come at a worse time due to competition for views and stars (many “significant” ones were involved in the Xbox One scandal) from Facebook’s burgeoning video platform.

The Register reported this month that the U.S. Federal Trade Commission (FTC) had settled with Machinima over “improper payments” made to video producers, endorsing the Xbox One. As a result of the undisclosed endorsements for the Xbox One, Machinima will be subject to additional disclosure and a requirement to maintain records relating to the Xbox One case available to the FTC for five years.

Users have been turning to video not just for gaming tips and reviews, but for help and advice in almost every consumer product category. The Xbox One endorsement scandal will have a significant impact on trust. With YouTube reporting video views rising by 50 percent year on year and corresponding partner revenue rising too, the stakes couldn’t be higher if users are turned off by the Xbox One settlement.

If the Xbox One settlement had arisen a couple of years ago, the impact would be less significant than today. Facebook has been aggressively pursuing video views this year, with the Wall Street Journal reporting that Facebook had started pursuing “YouTube stars” with their own partner program. Stars that presumably included at least some of the makers of the videos implicated in the Xbox One settlement.

With power over social traffic and views, in the same way that Google has power over search traffic and views, Facebook is also able to feature ads and content hosted on its own platform over those hosted elsewhere, as reported on Pingler. The International Business Times reports that there is some debate over whether Facebook is really No. 1 for video already, and whether their rights management shortcomings are responsible for their initial growth. However, if they are able to stake out a significant market share in video, it’s inevitable that some online video stars, whether recording Xbox One videos or gardening tips, will make the move over to hosting on the platform.

Wars like this one between tech giants are won not just in the big moves, but in small battles in the trenches, and any trust lost by YouTube creators as a result of the Xbox One scandal could mark another milestone in Facebook’s march into the video space. Of course, the other big danger for YouTube is that users could just prefer consuming their Xbox One gaming tips on Facebook instead of heading to YouTube to search. Microsoft was not cited by the FTC in the Xbox One settlement.

[Image Source: Microsoft Xbox One Press Center]