Recently, social media platforms have introduced several measures to counter misleading information. Among these measures are state media labels which help users identify and evaluate the credibility of state-backed news. YouTube was the first platform to introduce labels that provide information about state-backed news channels. While previous work has examined the efficiency of information labels in controlled lab settings, few studies have examined how state media labels affect user perceptions of content from state-backed outlets. This paper proposes new methodological and theoretical approaches to investigate the effect of state media labels on user engagement with content. Drawing on a content analysis of 8,071 YouTube comments posted before and after the labelling of five state-funded channels (Al Jazeera English, CGTN, RT, TRT World, and Voice of America), this paper analyses the effect state media labels had on user engagement with state-backed media content. We found the labels had no impact on the amount of likes videos received before and after the policy introduction, except for RT which received less likes after it was labelled. However, for RT, comments left by users were associated with 30 percent decrease in the likelihood of observing a critical comment following the policy implementation, and a 70 percent decrease in likelihood of observing a critical comment about RT as a media source. While other state-funded broadcasters, like Al Jazeera English and VOA News, received fewer critical comments after YouTube introduced its policy; this relationship was associated with how political the video was, rather than the policy change. Our study contributes to the ongoing discussion on the efficacy of platform governance in relation to state-backed media, showing that audience preferences impact the effectiveness of labels.