It is possible to make a simple change to your PayPal account. This could increase your profits by as much as 35%!
The artist and record label
It is clear that the old’record company” model of music sales is becoming obsolete by a digital download model. This new model allows bands to interact directly with their fans. The artist can sell digital songs and album downloads directly from their fans, earning them several times as much money per sale than the old’recording contracts’ model. The artist is now the record label and receives all of the money that would have been retained by the middleman in the old model.
After the artist has decided to market directly to their fans through online sales, he or she must decide how to handle the financial portion of the transaction. The best option for most artists is to partner up with PayPal for merchant services.
PayPal is easy, reliable, and everywhere
PayPal is the most popular provider of online transaction processing services. It has been in operation for more than a decade and is trusted by customers. This eases customer concerns about dealing with suspicious transactions. Customers can pay using their PayPal accounts, credit cards or debit transactions. It is an internationally-recognized brand with over 150 million accounts and the ability to transact in many currencies.
PayPal is used as a payment processor. Money is transferred from the consumer’s account to your PayPal account for every digital music download. PayPal is compensated for providing their services by a small amount of money for each transaction. This amount is taken from the seller’s receipts.
Two payment rates
It is not well-known that PayPal has two fee schedules or Merchant Processing Rates for sellers. The fee schedule outlines exactly how much each seller would pay to PayPal for processing the transaction. It may be beneficial to choose one of the two schedules depending on the size of your average transaction.
Flat rate of $0.30 in US Dollars plus 2.9% of total transaction costs the seller the Standard Fee. PayPal charges $0.33 per transaction fee to the seller if an artist sells one song for $0.99. This is a third of the total selling cost.
However, there is the Micropayments Fee structure. The Micropayments Fee structure costs sellers a flat rate $0.05 plus 5%. If we sell a single song for $0.99, PayPal will charge $0.10 transaction fee. This is less than one-third of the Standard Fee.
The Micropayments Fee structure can lead to dramatic increases in profitability, as we have seen. Consider a $0.99 single download as a typical transaction in your business Fakaza. This model would result in $0.89 per transaction using Micropayments Fee schedule as opposed to $0.66 with the Standard Fee schedule. This increases your profits by 35%
Is this right for me?
The Micropayments Fee is an excellent deal for small transactions. It makes small transactions more competitive because it has a lower flat fee. It becomes less attractive as the average transaction costs rise.
Where is the crossover point? It is approximately $12.00. The Micropayment Fee is recommended if your average transaction will be less than $12.00. This fee would apply to all digital downloads of singles and albums. The Standard Fee is better if your average transaction will exceed $12.00. But, do you really expect all your customers to purchase your albums at once?
PayPal’s Micropayments Fee option is not well-known. PayPal does not go to great lengths to promote its availability. It is not widely known. You might consider changing your PayPal account to the Micropayments Fee Schedule.
PayPal allows only one fee schedule per account. The Standard Fee schedule can only be used for certain transactions, while the Micropayments Fee schedule cannot be used for other transactions. This can be easily solved by having two accounts, one for each fee.
Second, PayPal only allows Business accounts to use the Micropayments Fee Schedule. The Micropayments Fee schedule is not available for Premier accounts or personal accounts. It is easy to open a PayPal Business account.
Many musicians sell digital downloads of their songs directly to their fans via the internet. This allows musicians to keep the majority of the sales that would have gone to the record company. The PayPal Micropayments Fee Schedule can significantly increase the profitability of most musicians. This is the best way to become a successful musician if you want to use this facility and pay PayPal less than a third what you’re currently paying!