An inability to profitably process small transactions has been a major impediment to growth in direct to fan digital music sales. A 99 cent track on iTunes nets an artist or label about 65 cents. Often a distributor takes another 10 - 25% diluting the profit further to under 60 cents. Additionally, who bought the track and other transaction data remains is not passed on to the artists. PayPal and others have been working to make micropayments profitable and yesterday brought their solution out of beta.
PayPal now allows consumers to pay for digital goods in as little as two clicks without leaving the publisher’s site. They call it, "the online equivalent to dropping a quarter in the slot to buy a gumball".
PayPal for digital goods is priced at 5% plus 5 cents for purchases under $12. Publishers and merchants are paid automatically and given immediate access to their funds, every time a customer purchases digital goods.
The result: a 99 cent track can net the artist as much as 89 cents, they get paid immediately and the transaction data is theirs to keep.