Web surfers use
to buy shareware, process auction payments, and donate money to Web sites. Thanks to a new pricing plan announced by the online payment service Monday, consumers could soon use PayPal when they shop for online music.
PayPal announced changes to its payment service for online merchants at this week’s Music 2.0 conference that target digital music services — particularly those that allow users to buy single songs instead of full albums. According to Todd Pearson, managing director of PayPal’s Merchant Services, the cost of processing credit card payments eats up about 25 percent of the revenue from selling a 99-cent track. Assuming another 71 percent goes to licensing fees, that leaves just 4 percent in profits — not a very attractive margin for online music retailers.
PayPal promises to increase the retailer’s take with more attractive payment-processing fees. The company will process fees at a rate of 2.5 percent plus 9 cents for each transaction; that compares to an industry rate of around 2 percent plus 20 to 30 cents.
While PayPal’s announcement Monday figures to appeal largely to retailers, consumers also stand to benefit from the convenience of using PayPal as an online payment option. “The biggest issue related to payments is the cost structure without giving up customer convenience,” Pearson said.
So should Mac users expect PayPal to appear as a payment option at Apple’s iTunes Music Store? Pearson declined to say whether PayPal has approached Apple other than to say his company has had discussions with a lot of the major players in digital music. Pearson expects retailers to begin announcing deals with PayPal later this month and into early 2004.