EXCLUSIVE INTERVIEW

‘We Didn’t Want to See the Future’: Q&A With Ex-Sony Lawyer Steve Gordon

In 1999 at a Sony Music corporate meeting, the room was filled with Sony executives and attorneys from across the globe. At one point, one of the Sony attorneys gave a presentation on two music services. One was the Sony music service and the other was a tiny, fledgling service.

The Sony service required users to go through multiple layers of Web sites in order to get to the songs they wanted. And even then, there were severe restrictions on the use of those songs.

Then the Sony attorney demonstrated the other service. She typed in the name of a Beatles song, “Hey Jude.” Not only did the the Beatles version appear, but so did other versions created by multiple artists.

And — it was free.

And by the way, the name of that service was Napster.


Podcast: Listen to the entire interview (25:45 minutes).


New Digital Age

Steve Gordon was one of the Sony executives present at that meeting.

Gordon is the author of The Future of the Music Business: How to Succeed With the New Digital Technologies, a book that lays out the rules for independent artists and entrepreneurs to distribute music digitally.

Almost 10 years later, the music industry is still reeling from the “Napsterization” of its business model.

In an interview with the ECT News Network, Gordon provides his insight into the impact of Napster and other digital technologies on the music industry.

According to Gordon, the music industry has already gone over the cliff, revenue has steadily declined over the last decade and the only remaining question is: How hard will the industry finally land when it does hit bottom?

Gordon also offers key insights into how independent artists especially have an opportunity with digital distribution. Using digital technology, he says, they can produce and distribute fairly cheaply and keep most of the profits for themselves.

Here are some excerpts of the interview:

E-Commerce Times: In a nutshell, could you briefly talk about Napster and the music industry and what really happened?

Steve Gordon:

I remember when Napster came out very well because we had a business affairs conference in New York at the time, and for the first time, all the lawyers from Sony — where I was still an executive — from all over the world attended this conference, and for the first time, they addressed digital music. The discussion on digital was led by a litigator, for reasons that will become clear in a second.

What happened was she showed us what Sony was doing with digital, and then she showed us Napster. What Sony was doing with digital in 1999 was offering two Mariah Carey singles for sale, and you had to go to the Sony Music Web site, then to Columbia Records’ Web site, and then inside Columbia Records, which was owned by Sony, you’d find Mariah Carey’s Web site — and then inside that Web site, you’d find these two singles for sale, and they were both around (US)$3. For $3, you could listen to each song on your desktop, but you couldn’t download it to your computer, you couldn’t share it with your friends, and you certainly couldn’t press a CD, or burn a CD.

Then she showed us Napster, and the glowing skull came up — it’s still around now, but in legal form. And she asked for a song from the audience, and somebody requested “Hey Jude.” She put it in the browser, and not only did the Beatles version come up, but every other artist who ever recorded the song — there were around dozens of versions, and they were all downloadable, they were all freely shareable with your friends, and they could all be burned to a CD, and they were all free.

ECT: Amazing difference between what Sony was doing and what Napster had done.

SG:

Then, we all got the impression that we were in trouble. And then it got worse — she requested another song and somebody came up with an obscure song from the ’50s, and again, dozens of different versions came up and they were all downloadable, burnable, shareable and free. So, we knew that we had a problem. So what did the record companies do, including Sony? Well, there were some that argued that we should make a deal with Shawn Fanning or create a Web site of our own to compete.

And we chose not to do this — we chose to sue Napster instead of creating an alternative and instead of licensing Shawn Fanning, which he requested that we do. He wanted to negotiate and pay us. But the business model in 1999 was so successful that we couldn’t get off of that approach — which was to sell records like no tomorrow and hope that a few would sell incredible numbers, which happened.

ECT: What you’re saying is that the cash cow was so great that you couldn’t see the future coming at that point?

SG:

Well, we didn’t want to see the future. Let’s give you a concrete example: For less than $1 million we could create a Mariah Carey CD, compared to Hollywood, where their blockbuster movies cost $25 to $50 million, even then. And if we sold 5 million units, which we often did of artists like Mariah or Pearl Jam, or Bruce Springsteen, Bob Dylan, Billy Joel, we could make $10 wholesale for every record. If you sold 5 million, that’s a hell of a lot of money.

ECT: That’s $50 million.

SG:

And only with an investment of about a million. So the record companies, all five of them — the majors at the time — they resisted the change that they saw in Napster, because they were making so much money the old-fashioned way. So they sued Napster, and they sued it out of existence. It took two years, but they were successful.

However, while they were suing Napster, other peer-to-peer systems were growing, like Kazaa, created by other teenage technologists. And in fact they were faster, easier to use than Napster, and offered more music because they allowed people to share directly with each other instead of through a central database. So while the record companies were resisting the growth of digital and trying to shut down peer-to-peer, the world was going in a different direction. In fact, the world of the fans and the major consumers of recorded music was going in a different direction.

Podcast: Listen to the entire interview (25:45 minutes).

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CRM Buyer Channels

Sports Betting Platforms Gambling With Substandard CX

sports betting online

Online gambling is at an all-time high in accessibility and popularity. But many betting app developers are rolling the dice blindly without addressing users’ customer experience (CX) concerns.

More states in the U.S. are legalizing sports betting with legislation pending in many others. Major sports leagues such as the NFL and the PGA Tour are adding legitimacy to the organized sports betting space by securing high-profile gambling partners. Sportsbooks like FanDuel, DraftKings, BetMGM, and Caesars are expanding in concert.

With money on the line, literally, with betting apps, these companies have a heightened burden to provide customer support. That could well be a survival requirement since many of their online bettors have never previously gambled on sports, let alone placed bets via mobile apps.

Appeasing Regulators

So far, sports betting platform rollouts in new states have been relatively seamless. Yet some obvious CX issues must be addressed before watchdogs and regulators step in.

Sports betting companies need to tackle four potential stumbling blocks:

  1. The product is still new to many customers. Gambling companies need to clear up confusion on the legal methods of sports betting and drive confidence that bets will be paid out.
  2. Most sports betting companies are pushing mobile apps for daily usage and interaction, leaving a strong need for tech support to help with logins and payment issues.
  3. Geolocation issues are a major factor. If users are near bordering states where sports betting is illegal, their phones might mistake them for being in the wrong location and their bets will not go through.
  4. Seasonality. Major sporting events such as the Super Bowl, March Madness, The Masters, FIFA World Cup, and the World Series amplify betting activity. As a result, gambling companies must have robust CX infrastructures in place to handle increased seasonal demand.

One of the biggest challenges is volume projection and staffing due to the sector’s rapid growth and lack of historical data, according to Chris Crowley, chief commercial officer for CX provider Alorica. A significant and continuous increase in users is coming from existing states, as well as new states legalizing sports betting apps.

“As the user base increases there is an increase in transactions across voice, chat, and email — especially from new users and novice users of sports betting apps. The ability to develop the appropriate staffing models and to train the staff effectively is crucial to delivering an exceptional customer experience,” he told CRM Buyer.

Betting on Digital-First Stability

Another big test for the sportsbooks, noted Crowley, will be finding the bandwidth to handle peak seasons when major sporting events drive a flurry of betting activity.

To withstand scrutiny from regulators and watchdogs, these companies require trained staff who can work with customers across voice, chat, text, and email.

“Like other digital-first companies that are born highly focused on product, sports betting companies may not yet fully appreciate the need for tech support and account management,” he cautioned.

For example, most sportsbooks rely on website FAQs to support their customers. Many of the new customers are gambling on sports for the very first time.

CX is critical to handle these concerns because money is involved. Customers rightly want access to a support person when they spend money to get something in return, such as a bet to win or deposit to get a bonus or free bet.

App Speed Risky Business

Logistically, the speed of the app interface makes betting easier. But it also increases the risk of mistakes, warned Crowley. That is why it is crucial to have knowledgeable and readily-available support offerings from live agents and automated channels.

Fierce competition to develop repeat customers makes CX crucial to this emerging market. Companies such as DraftKings, Caesars, BetMGM, and others are currently spending tremendous amounts of money to rapidly grow their user bases through aggressive marketing.

“To get the necessary return on this investment, they must develop user loyalty as it is so easy for users to jump to another app. One poor service experience can turn a novice bettor off forever,” said Crowley.

Another reason CX is important is sports betting has its own community and lingo. It can be unkind to newcomers who do not have a firm understanding of betting odds and how promotions work.

“A big issue surrounds where ‘free’ does not always mean free. Having a customer service team backed by a real CX strategy gives new users a lifeline to figure out the nuts and bolts of sports betting,” he explained.

Driving Factors

Social acceptance of sports betting is now common. State governments increasingly are becoming supportive of the industry.

Additionally, with the rise of second screens, sports fans have found new online communities that share their love of the game, Crowley noted. Fans today are often on Twitter and Reddit while watching their teams play, reading and reacting to what other people have to say about the game.

This further encourages fan engagement. Online sports betting has benefited from the influence of social media and, to an extent, cord-cutting, which has evolved the way we consume sports, Crowley observed.

“As sports betting gains wider social acceptance and state legalization continues, the industry will rapidly grow. For many, sports betting has become synonymous with watching and attending sports events,” he said.

In a short period of time, this will be an ingrained part of our social norms. The number of American adults betting on sports doubled in the last year alone. It is crucial that companies in this sector invest in a robust CX operation and explore strategic partnerships with vendors that can keep customer engagement impactful, secure, and scalable, urged Crowley.

Morphing World of Rules and Regs

The regulatory environment is rapidly changing in the mobile sports betting industry and online gambling.

Overall, online sports betting platforms are progressing with new functionality at breakneck speeds due to the fast changes in state regulations and requirements. Most of the major sportsbooks and online sites are still in the process of obtaining required licenses in recently-legalized states.

The Supreme Court decision in Murphy v. NCAA gave states the ability to pass their own sports betting legislation. Some 30 states — plus D.C. — have legalized sports betting with 22 legalized for mobile and online sports betting. Twelve states have active or pre-filed legislation on the ballot for 2022.

State laws vary greatly. Regulations range from betting in onsite casinos versus mobile/online to the age of bettors. Restrictions cover the types of bets, such as collegiate sports versus pro contests. Tax rates vary by state also.

Some states allow tribal and commercial casinos. Others like Oregon, New Hampshire, and Rhode Island only allow one or the other, or a state lottery commission runs the betting.

“Like any consumer-facing industry, there are also protections around personally identifiable information,” Crowley said. “As sports betting and mobile/online wagering become more common across different state jurisdictions, the landscape will only continue to evolve.”

On Deck, Real-Time Customer Service

Online sports betting requires unambiguous fairness and transparency. The entire customer journey should be shepherded by a customer support offering that can resolve issues in real time.

The typical response time so far is 24 to 48 hours later for some betting companies, according to Crowley. This process includes accessing relevant information, placing bets, and collecting the winnings.

“The industry would be wise to establish a new CX standard, one that will give confidence in the integrity of this emerging business model,” he recommended.

Plenty of disclosures, FAQs and robust “help” systems with omnichannel functionality will become the norm in the mobile and online sports betting experience, he concluded.

Jack M. Germain

Jack M. Germain has been an ECT News Network reporter since 2003. His main areas of focus are enterprise IT, Linux and open-source technologies. He is an esteemed reviewer of Linux distros and other open-source software. In addition, Jack extensively covers business technology and privacy issues, as well as developments in e-commerce and consumer electronics. Email Jack.

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EXCLUSIVE INTERVIEW

Metaverse Marketing Offers New Approach To Utilizing Customer Data

In Neal Stephenson’s popular 1992 sci-fi novel “Snow Crash” the author introduced the term metaverse to portray a futuristic world where people interacted in virtual 3D worlds using avatars. While his avatar-laced society is a familiar playing field for virtual game fans, few others but forward-looking marketers envisioned much usefulness in the realities of e-commerce.

That is, until now. Facebook CEO Mark Zuckerberg turned the M-word into a vibrant new name for his now rebranded metaverse company, Meta.

Since the “Snow Crash” novel craze, the metaverse term described multi-user, persistent virtual worlds that incorporate social interaction. The game Second Life, which launched in 2003, was the first metaverse to achieve meaningful user adoption, according to Wendell Lansford, co-founder and CEO of MarTech firm Wyng. Multiplayer online games and platforms, like Minecraft, Roblox and Fortnight, may also be considered as variations of a metaverse.

“Today, the term metaverse describes shared environments that bring together aspects of social media, virtual, and augmented reality, multiplayer online games, and cryptocurrencies to create immersive, digital experiences that both reflect and bridge to the physical world,” Lansford told the E-Commerce Times.

New Frontier for E-Marketing

The metaverse is a digital universe where people as avatars live, play, interact, and work. In the virtual community of the game Second Life, many users work full-time jobs creating and selling digital goods.

That concept of bringing shared environments together gives new life to some tired old marketing strategies. It also suggests exactly where Facebook and the marketing industry plan to go. To borrow a “Star Trek” slogan, it’s a place where no advertisers have gone before.

The online shopping world will become an exciting place. Facebook’s name change as a business force may well carve a place out of the metaverse. Suddenly, metaverse has generated a huge buzz over the potential benefits that this 3D shared environment has to offer.

This new metaverse frontier of digital development may well have unparalleled advantages for enterprising technology enthusiasts. The metaverse concept may well be the driving force to take e-commerce marketing to the next level. But many people are questioning how it could be used.

Zero-Party Data

Digital relationships between brands and consumers and the risk/reward strategies of third-party data have shifted immensely in recent years. As marketers begrudgingly shift away from the practice, the rise of the metaverse presents a unique opportunity for brands to start fresh and employ new privacy-first initiatives.

Being that each user in the metaverse is an authorized user, both brands and consumers are empowered to get the value exchange they want. In exchange for certain coupons, digital goods or access to areas, brands can ensure they are collecting data that was shared with explicit consent.

This eliminates guesswork from both sides. If done correctly, it has the chance to change how we look at data forever, noted Lansford.

Lansford’s company Wyng is positioned to help companies and their customers successfully co-exist with effective online interaction strategies. Wyng uses API-powered infrastructure for zero-party data (ZPD).

Zero-party data is all the consent-based, personal context data that customers share to improve their experience with brands. It gives customers transparency and control over their profiles and builds trust. The process involves personalizing experiences in real time across channels.

Discussing Business in the Metaverse

The E-Commerce Times discussed with Lansford how metaverse technology will impact brands and their customers.

E-Commerce Times: How is the metaverse different than what is non-metaverse?

Wendell Lansford: Think of the non-metaverse as today’s internet as exemplified by Facebook, Google, Amazon, Netflix, Spotify, and any web or e-commerce site.

Metaverse environments, on the other hand, run in parallel to today’s internet. It works much like multiplayer online games. Compared to today’s internet, emerging metaverse environments will offer richer experiences where the virtual and physical worlds converge, and the experience of interacting with others approximates real life.

Is the metaverse concept strictly aligned with e-commerce — meaning doing business over the internet — or does it have connections to other industries, too?

Lansford: In addition to e-commerce, metaverse technologies will have applications in a range of industries. These include entertainment, gaming, social media, education, fitness, travel, real estate, and marketing and advertising.

For example, one popular application today is watching movies (and chatting) with remote friends in a shared virtual theater.

As another example, in November, a plot of virtual real estate in Decentraland (a popular crypto-powered metaverse environment) sold for $2.43 million. The land, purchased by Metaverse Group, will be developed to facilitate fashion shows and commerce within the exploding digital fashion industry.

Fair value exchange (FVE) is a key element of business in metaverse. How is the importance of FVE instead of not shorting consumers in data exchanges a new concept?

Lansford: In the past, brands have primarily collected data about consumers by purchasing data from data aggregators/brokers (i.e., third-party data) or by tracking consumers’ clicks, searches, and purchases on a brand-owned website or mobile app (i.e., first-party data). These ways of collecting data happen behind the scenes, typically without the consumer having any knowledge of the data being collected.

As a result of privacy regulations and privacy-aware consumers, brands are now investing in zero-party data. This is data that consumers knowingly and intentionally share with a brand in exchange for something of value, like a personalized recommendation, loyalty points, and/or a coupon. Consumers will share their data with a brand they trust when the brand makes it worth their while.

How can brands gather zero-party data in the metaverse?

Lansford: The only way to gather zero-party data is by asking for it. On the web, brands ask for zero-party data via micro experiences like guided shopping quizzes, next-best questions, surveys, polls, sign-up forms, and conversational chatbots.

These same techniques can be adapted to the metaverse, but with richer interfaces. The metaverse also opens new possibilities for asking for zero-party data.

For example, imagine a virtual store with a knowledgeable shopkeeper who is there to help customers by engaging them in conversation. The shopkeeping gets to know customers’ personal needs, preferences, goals, and interests (again, zero-party data). Then, with the customers’ permission, the retailer uses that data to provide a more personalized experience with the brand.

Moreover, NFTs or non-fungible tokens, open up new possibilities for value exchange in the metaverse. They can be redeemed for real goods on a brand’s site or in a physical store.

Closing Thoughts

Metaverse commerce is in its early days, with lots of innovation and improvements still to come, Lansford observed. However, the multiplayer online gaming market offers an analogy for virtual worlds and e-commerce coming together.

“[Last year] for example, nearly 20 million people visited a two-week Gucci exhibit, where they could purchase limited-edition Gucci accessories for their avatars,” he said.

Jack M. Germain

Jack M. Germain has been an ECT News Network reporter since 2003. His main areas of focus are enterprise IT, Linux and open-source technologies. He is an esteemed reviewer of Linux distros and other open-source software. In addition, Jack extensively covers business technology and privacy issues, as well as developments in e-commerce and consumer electronics. Email Jack.

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