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PayPal wants its share of digimusic biz

8 December 2003 13:18 by Petteri "dRD" Pyyny | 6 comments

PayPal, the payment processing company, nowadays part of eBay, apparently wants to have its share of digital music download business. No, PayPal is not planning to launch a music store, but instead has introduced a payment processing plan that will most likely appeal to most of the stores selling legal digital music online.

As record labels typically charge between $0.65 and $0.80 per each downloadable music and the "industry standard" pricing structure has been set to $0.99 per song, the margins are already bit small (although compared to some other areas of IT business, 20 to 35 percent margins sound very good) for companies running the music stores. But the big problem is with payment processing, as most of the payment processing companies charge between $0.20 and $0.30 for each transaction plus appx 2 percent of the payment, profits seem to be virtually impossible to achieve for likes of iTunes. Some companies, most notably iTunes, "bundle" the customer purchases into bigger transactions to keep the fixed part of the payment processing costs as small as possible, but it usually means delaying the charges until the end of the business day and causes various other issues with payments.

PayPal now tries to use this fact to gather bigger slice of the emerging digital music business by introducing a payment processing plan that charges only $0.09 as a fixed fee for each transaction and then 2.5 percent of the purchase price. Difference might seem small, but if we hypotethically think the difference between $0.25 fixed price plus 2% of the average price and $0.09 and 2.5% of the average price and set the average price to be exactly $1. Now, with one million transactions the difference would be a quite whopping $155,000.

Source: PayPal press release/Yahoo!

Permalink to this article

iTunes customers can now use PayPal (12 December 2004)

PassAlong and eBay to enter music download market (23 September 2004)

iTunes: over 20M songs sold (9 December 2003)

Some MP3s to go with that Coke? (8 December 2003)

Microsoft plans to launch music downloads service in 2004 (17 November 2003)

MTV prepares to challenge iTunes (and others) (5 November 2003)

iTunes for Windows launched (16 October 2003)

MusicMatch launched its iTunes-clone (29 September 2003)

Sony plans to launch its own online music service (4 September 2003)

Microsoft's iTunes clone in Europe (14 August 2003)

Buy.com launches its music service -- spiced with DRM (22 July 2003)

Apple iTunes hits 3.5M songs sold - now selling 0.5M a week (9 June 2003)

More online music stores - Apple enters the new market (28 April 2003)

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Discuss this article!
Ghostdog (Senior Member) 9 December 2003 4:15
Off topic, but whatever... A dollar per song is overpriced. Depending on the album you were looking to buy, that would make the full set cost about as much as a store-bought CD. Selling the tracks this way counts out shipping costs and manufacturing costs for the label. So basicly we should be paying less per track than we�re paying now. That�s the music-business real problem, overpriced goods. [ + quote]
dRD (I hate titles) 9 December 2003 7:15
Test [ + quote]
strcruzer (Junior Member) 10 December 2003 4:43
Like I have said in the past the music industry is big business and is trying to squeeze more $$ out of the consumer, same business model different delivery. Starcruiser Intel 440BX MB, Dual Intel 1.2Ghz P3's, 2GB RAM TDK 440N, 390GB ATI AIW 8500DV Win2k Srvr [ + quote]
Ketola (Admin) 11 December 2003 3:47
Test again [ + quote]
Ghostdog (Senior Member) 18 December 2003 21:50
What�s with the tests? [ + quote]
maryjayne (Junior Member) 4 January 2004 15:12
I said it before and I will say it again. I still like free. <p> And one more thing. Test [ + quote]