Digital Audio Insider -- the economics of music and other digital content

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Digital Audio Insider is David Harrell's blog about the economics of music and other digital content. I write from the perspective of a musican who has self-released four albums with the indie rock band the Layaways.

My personal website has links to my LinkedIn and Google+ pages and you can send e-mail to david [at] thelayaways [dot] com.

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April 15, 2009

PayPal's Micropayment Option:
What It Means For Digital Download Pricing
by David Harrell

Via the Bandcamp blog, I just rediscovered PayPal's micropayment option for sellers. (My apologies to Stu -- he mentioned it in a comment to my first Bandcamp post, but I failed to follow up on it back then.) It allows sellers to pay a higher pre-transaction percentage (5% as opposed to 2.9%) in exchange for a lower per-transaction fee (5 cents instead of 30 cents).

PayPal micropayment fees

When I first wrote about Bandcamp, one of my few qualifications was that the PayPal transaction costs severely limited the pricing options for single-song downloads. While a self-released artist selling a 99-cent download via Bandcamp (or the artist's own website) would net, after the PayPal fees, about as much as a 99-cent download sold at iTunes, the 30-cent portion of the fee meant that pricing a download below 99 cents meant earning less on direct sale. And you could forget about direct sales of tracks at eMusic prices, as a 25-cent download wouldn't even cover the PayPal fees.

But with the micropayment option, the self-released artists would net 89 cents on a 99-cent download. Or, you could undercut iTunes by 20 cents and still receive around 70 cents a track.

The micropayment fees also allows for some extremely aggressive pricing: If an artist wants to offer eMusic-equivalent prices for direct downloads, a 25-cent track will still net almost 19 cents. That's much less than what an iTunes sale puts in the pocket of a self-released artist, though my guess is that it's more than most major-label artists receive for songs sold on iTunes.

For a $9.99 album, the PayPal micropayment fees would reduce the net to $9.44, as opposed to $9.40 with the standard PayPal fees, making it something of a wash. Once the selling price reaches $11.90, the micropayment option becomes more expensive to the seller. So while it's perfect for digital tracks and albums, if you're selling $15 t-shirts you'd probably want to opt -- as suggested by the Bandcamp blog post -- to use a separate PayPal account for those sales.

related: Checking Out Bandcamp

tags: digital music PayPal Bandcamp

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THE LAYAWAYS

Out Now -- "Maybe Next Year" -- The New Holiday Album:

"This is a sweet treat, deliciously musical without being overbaked for mass media consumption." -- Hyperbolium

"Perfect listening to accompany whatever holiday preparations you may be making today." -- Bag of Songs

O Christmas Tree - free mp3 lyrics and song details
Away In A Manger - free mp3

Download from eMusic, iTunes, Amazon MP3, or Bandcamp. Listen to free streams at Last.fm.

"...about as melodic and hooky as indie pop can get." -- Absolute Powerpop

"Their laid-back, '60s era sounds are absolutely delightening." -- 3hive

"...melodic, garage-influenced shoegaze." -- RCRD LBL

Where The Conversation Ends - free mp3
January - free mp3
Keep It To Yourself - free mp3

Download from eMusic, iTunes, Amazon MP3, or CD Baby, stream it at Last.fm or Napster.

"The Layaways make fine indie pop. Hushed vocals interweave with understated buzzing guitars. The whole LP is a revelation from the start." -- Lost Music

"Catchy Guided by Voices-like rockers who lay it on sweetly and sincerely, just like Lionel Richie." -- WRUV Radio

Silence - free mp3 lyrics and song details
The Long Night - free mp3

Download from eMusic, Amazon MP3, or iTunes, stream it at Last.fm, Napster, or Rhapsody.

"These are songs that you want to take home with you, curl up with, hold them close -- and pray that they are still with you when you wake up." -- The Big Takeover

Let Me In - free mp3
Ocean Blue - free mp3

Download from eMusic, Amazon MP3, or iTunes, stream it at Last.fm, Napster, or Rhapsody.

More Layaways downloads:

the layaways website