PayPal Announces New Fee for Online Music Firms

[Cyxeris]

PayPal Announces New Fee for Online Music Firms
30 minutes ago


SAN FRANCISCO (Reuters) - Online payment provider PayPal, a unit of online auctioneer eBay Inc. on Monday announced new payment processing fees for high-volume online digital music companies.

The new fee that online music stores pay to PayPal to process song sales is 2.5 percent plus 9 cents for each transaction, compared with typical credit card fees adding up to 20 cents to 30 cents.

While no online music company -- such as Apple Computer Inc.'s iTunes music store, Roxio Inc.'s Napster or closely held MusicMatch -- has yet inked a deal for the new fees, announcements are forthcoming, said Todd Pearson, managing director of merchant services at PayPal.

"We're talking to the bigger players," Pearson said.

PayPal's standard rate for clients that process more than $1,000 a month through PayPal is 2.2 percent plus 30 cents per transaction.

Pearson said that rate doesn't make economic sense for online music companies, whose profit margins on songs -- which often sell for 99 cents per song -- are already very slim.

"I think it certainly makes PayPal more attractive, but I don't know if it's enough," said Phil Leigh, senior analyst with market research firm Inside Digital Media. "That (fee) might still have to come down."

Leigh said that labels, on average, receive about 60 cents per song, and there are also the online music store's operating costs and other royalties and fees to factor in.

"But it's certainly more attractive than what was available before" from PayPal, Leigh said.

PayPal's Pearson said online music customers could use PayPal, which has 35 million account members, in addition to the credit and debit cards that customers already use when purchasing digital music online.