Sunday, February 13, 2011

Paypal Introduces Micropayments

As many of you who read this blog know, I'm a huge proponent of potential of micropayments as a catalyst to increase music sales (see #2 of my post "4 Steps To A New Music Business"). Micropayments are transactions that are much less than a dollar and may be as little as one cent. The reason why they haven't been incorporated as of yet is that the transaction costs imposed by banks and credit card companies make penny, nickel or dime transactions impossible since the transaction costs are greater than the transaction itself.

It's been my contention that an artist can make more money with a great number of small transactions than with a smaller number of larger (like $0.99) transactions, hence the need for some sort of microtransaction platform.

Now comes word that Paypal has instituted a new digital micropayments solution, that while not allowing penny transactions, is a great start. Paypal will charge 5 cents plus 5% of any transaction under $12 in their new system, which is great news for any band or artist with a lot of fans, views and/or low-cost products. It means that if an artist sells a track for 99 cents, they get to keep 89 cents of the transaction, plus get to keep all of the purchasers data as well (rather than giving it to iTunes, Amazon or the like).

Although I don't predict that many will get rich as a result of micropayments (although some undoubtedly will), any income stream is better than none at all, lowering the price point of musical product (and the resistance point as a result) can only help.

Find out more at Paypal.
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