SAN JOSE, CA (Hypebot) – The artist to fan relationship is the mantra of music 2.0 and direct to fan sales are touted as the most effective monetization strategy. But two roadblocks have kept this dream from becoming a reality for most indie musicians: consumer trust and transaction costs. Now PayPal's MicroPayments system offers a solution to both problems.
Selling tracks direct to fans makes sense. Providers like Nimbit make it easy and some like Bandcamp turn tracks into viral promo tools. Certainly fans want to support artists rather than fill the coffers of "the man". Unfortunately, it turns out that a dirty little secret of the online music business is that even bigger players like Rhapsody have a hard time getting consumers to enter their credit card info. It's one of the reasons that Amazon MP3 is so successful. Millions trust Amazon and already have their card on file. Apply the trust test to leaving your credit card info on the site of that death metal band that just came through town and you start to see the problem.
The other roadblock facing artists has been the high price of small transactions.
Major credit card providers have no interest in collecting and paying pennies from low volume sellers Previous PayPal options charged a minimum transaction fee of 30 cents plus 2.9%. Add those two together and you are almost better off sending track sales to iTunes. Price a track at less at $.50 or less and you might as well give it away free.
PayPal's Mircopayment option raises the percentage to 5% but lowers the fee to just 5 cents. That changes the net profit on a $.99 cent direct sale to $.89 cents vs. $.66 under the old PayPal option. Sell just one hundred two or three song bundles and the total PayPal transaction costs drop from $36 to $15.
Add lower transaction costs to the familiarity that particularly younger fans have with PayPal and the promise offered by direct to fans sales just got a lot closer to reality.