Secret to Maximizing Revenue For Music Downloads Using PayPal Micropayments
You can probably make a change to your PayPal Account, which could boost your profits up to 35% or more.
The artist/record label
The traditional record company model of music selling is in decline. Digital downloads are taking over. The new model allows bands direct interaction with their fans. Digital album and song download sales can be done directly by bands to fans. This is a far better model than the traditional’recording agreement’ model. In fact, under the new model the artist plays the role of record labels, and is able to receive all the money that was previously retained by the middleman.
Once an artist decides to market to fans directly via online sales, they must select a way to handle the financial side of the transaction. This is the most common option for artists.
PayPal makes it easy to trust and is ubiquitous
PayPal is the largest provider of internet transaction processing. PayPal has been around for over a decade. It is a trusted brand that makes it easy to deal with any suspicious transactions. It lets customers pay how they want, whether it’s through their PayPal account balances, credit cards, debit transactions or via debit cards. It has over 150 million accounts and can transact in dozens different currencies. This makes it a well-recognized company.
PayPal acts as a payment processor. The money is paid from the account chosen by the customer to your PayPal account. PayPal receives a small commission for every transaction. This amount is deducted from the seller’s receipts.
Two payment rates
Not many people know that PayPal charges sellers two different fees (or Merchant Processing rates). This fee schedule details exactly how much each sale will cost PayPal to process the transaction. Depending on how large your average transaction is, you may find it advantageous to follow one or the other schedule.
The seller pays a flat fee of $0.30 (in US dollars) plus 2.9% on the total transaction. PayPal charges $0.33 for each transaction, which is one third of the total cost to sell a song at $0.99.
The Micropayments Fee structure is available. This structure charges the seller $0.05 plus 5.5% as the Micropayments Fee. PayPal charges $0.10 for a transaction fee, which is less than one third of the Standard Fee.
Maximizing profits
As you can see, the Micropayments Fee structure could result in a dramatic increase in profitability. Assume that a single $0.99 single download is an average transaction for your company. You would make $0.89 per transaction if you used Micropayments Fee Schedule, as opposed $0.66 if you used the Standard Fee Schedule. Or, to put it another way, you will see a 35% increase in your profits!
Is it right?
It is easy to see why the Micropayments Fee offers a better deal for small transactions. Small transactions are more affordable because of the flat rate Fakaza. With a higher percentage it is less advantageous as the average transaction cost rises.
Is there a crossover point? The average is $12.00. You should use the Micropayment Fee if you anticipate that your average transaction will be lower than $12.00. This would be the case for most digital downloads, including singles and album. It is better to use the Standard Fee if you anticipate your average transaction to exceed $12.00. However, are you expecting your average customer will buy all of your albums at once or do they?
Signing up
PayPal’s Micropayments Fee option may be a lesser-known feature. PayPal doesn’t go to great lengths advertising its availability. Many people don’t know about its existence. It is possible to change your PayPal account to include the Micropayments Fee schedule.
PayPal allows one fee schedule for each account. One account cannot have both the Standard Fee schedule (for some transactions) and the Micropayments Fee Schedule (for others). This is easily fixed by using two accounts — one to each fee schedule.
Second, PayPal permits only business accounts to utilize the Micropayments Fee schedule. Both Premier and Personal accounts are not eligible. Opening a PayPal business account is simple.
Wrapup
Many musicians now sell digital downloads directly to fans via the internet. This allows the musician retain the lion’s share of sales previously retained by record companies. These musicians can see a dramatic increase in their profitability with the PayPal Micropayments Fee schedule. It would be a great idea to learn how to use the PayPal Micropayments Fee schedule and begin paying PayPal less that a third of what it costs today.