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You can most likely make a small change to PayPal, that could easily increase your profits by 35% and more

The artist for the record label

It’s clear that the traditional model of music distribution through a record company is now obsolete. Bands can now interact with their fanbase directly in this model. Direct sales of digital albums and song downloads from band to fan net artists several times more than the old’recording deal’ model. Under the new model, artists play the role as record labels and are able to keep all the money previously held by this middleman.

Once the artist has made the decision to market direct to his fans via online sales he must then choose the best way to handle the financial aspect of the transaction. Partnering with PayPal to provide merchant services is the best choice for the vast majority of artists.

PayPal has a simple, trusted, and universal.

PayPal is the world’s leading provider of internet transaction services. Over a decade in existence, PayPal is a trusted and secure brand. Customers can feel less anxious about dealing directly with unknown transactions. It allows customers to pay with the payment method they prefer, including credit cards, debit transactions, and from their PayPal account balances. It is a worldwide-recognized name, with more than 150 Million accounts and the ability of transacting in dozens if currencies.

PayPal works as a pay processor and money is transferred from the account of the customers to your PayPal for each digital song download. PayPal receives compensation for providing this service by receiving a small amount for each transaction. This amount is deducted directly from the seller’s receipts.

Two payment rates

The fact that PayPal has separate fees for sellers is something not many people are aware of. The fee schedule defines exactly how much a seller would have to pay PayPal for the processing of the transaction. It is possible to opt for one or both of these schedules, depending on the amount of your average transaction.

The Standard Fee is a flat rate fee that costs the seller $0.30 (in US$) plus 2.9% of the total transaction. PayPal charges $0.33 to the seller per song sold at $0.99. This represents a third the selling cost.

There is however the Micropayments Fee structure. A flat rate of $0.05 plus 5 percent is required to pay the Micropayments Fee. PayPal would charge $0.10 per transaction fee if a song is sold at $0.99. That’s less than one-third the price of the Standard Fee.

Maximizing profits

As we’ve seen, Micropayments Fees can dramatically increase profitability. Let’s say that one $0.99 single download represents a typical transaction for you. This model will net you $0.89 per transaction that uses Micropayments Fee schedule instead of $0.66 for the Standard Fee schedule Fakaza. This will increase your profits by 35%

Is that right?

You can see that the Micropayments Fee provides a much better deal on small transactions. Because it charges a flat rate that is lower, small transactions can be competitive. But, a higher percentage makes it less affordable as the average transaction price increases.

Then, where’s the crossover point. It’s about $12.00. If your average transaction is less than $12.00, you should consider the Micropayment fee. This fee is applicable to digital downloads of most singles or albums. The Standard Fee would be more effective if your average transaction is greater than $12.00. But do you really expect your average customer buy all your albums at one time?

Signing Up

PayPal’s Micropayments Fee option, which is not widely known, is an important feature. PayPal does not make any effort to publicize its availability. Most people are unaware of its existence. There are several options to convert your PayPal account into the Micropayments fee schedule.

PayPal only allows you to use one fee schedule on a particular account. A single account cannot have the Standard Fee Schedule for some transactions and the micropayments Fee Schedule for others. This can be solved by creating two accounts for each fee schedule.

The second is that PayPal does not allow business accounts to access the Micropayments Fee schedule. Premier accounts and personal accounts do not qualify. However, opening a business account with PayPal is very simple.

Wrapup

Many artists are now selling digital songs to fans online. This allows the musician the opportunity to retain the largest share of sales that was previously held by the record label. This can dramatically increase the musician’s profitability. If you are a musician of this nature, you should learn how to utilize the facility to pay PayPal less then a third today.