by Jonathan Coulton
First you should understand that while you will be saving money on commissions that would otherwise go to CD Baby, iTunes, Snocap, etc., you will still have to pay commissions to someone. Paypal will take a cut, as will some of the third parties that host your files and/or handle the delivery. So it’s important that you choose your options carefully to maximize your profit (remember when it was just about the music?).
Basically you need three pieces to make this work:
1) a website
2) a way of accepting payments
3) a way to store and deliver the files when they are purchased
If you don’t already have a website, that’s obviously the first step. Hostbaby (www.hostbaby.com) is a terrific choice for musicians – for $20/month you get unlimited bandwidth and great tech support, plus a lot of musician-friendly extras. Of course there are plenty of other options that I won’t get into here. The important thing is that you have the ability to create and edit web pages on your site, and depending on how fancy you want to get you might also want the ability to access a database like mysql. It’s fine to have a MySpace page, but that probably doesn’t give you the amount of control you’ll need to make your store look good and work well.
If you’re not already equipped to accept credit card payments online, you’ll need to choose a third party to handle this for you. Paypal (www.paypal.com) is a pretty common option here, a lot of people already have Paypal accounts from buying things on Ebay (and if they don’t, Paypal will also accept credit cards). You do have to be careful though: if you’re selling individual songs for a dollar, the standard paypal commission can really eat into profits. In addition to a standard Paypal account for large purchases, you’ll most likely want to set up a Micropayments account as well, which has a commission structure that takes a much smaller slice when the total amount is less than $12 or so.
Google Checkout (http://checkout.google.com) is another option, currently not taking ANY commission at all through the end of 2007. There are many others, but I’m mainly familiar with these two. Whatever you choose, make sure you minimize commissions while still making it as easy as possible for people to buy, and usually there’s no reason why you can’t make lots of options available. Keep the buying experience as un-clicky as possible – the moment someone has to set up a new account with a new service, you’ve made it that much more likely that they’re going to change their minds.
And don’t forget, at some point you may want to actually hold all this money in your hands so that you can use it to buy things. As the money flows into Paypal or Google Checkout or wherever, you’ll want to think about how you’re going to get it into your regular bank account. Internet banks are great for this – they have minimal transaction fees (if any), and you can quickly and easily set up accounts, transfer money around, and generally keep track of things without leaving your house. Plus their interest rates are usually much better than a standard brick and mortar bank.
The final piece is the tricky one – someone needs to connect the payment with the product, and make sure that everyone who pays a dollar gets an mp3 (in exchange for a small fee of course). With most services you can create an account, upload a file, create a product, and copy and paste a “Buy” link to your website in a couple of minutes. They’ll coordinate the monetary transaction with the online payment service, and if everything comes through OK, email a download link to the buyer. There are a few options here as well depending on how much flexibility you need and how much work you want to do.
Payloadz (www.payloadz.com) has a tiered pricing structure, so the actual percentage they take changes depending on how much you sell in a month. They will host the files for you, but you can also keep the files on your site if you don’t care about people using your bandwidth when they download their purchase from you (did I mention HostBaby has unlimited bandwidth?). If you’re using Paypal, they’ll seamlessly switch between your Micropayments account and your regular account depending on the total purchase price to minimize the commission. They also support Google Checkout and some other options.
There’s also E-Junkie (www.e-junkie.com) with which I’m just getting acquainted now, but it seems to be pretty much the same service with a smaller commission. They also support Paypal, Google Checkout and a number of other options, though at the time of this writing they don’t handle the Micropayments issue out of the box. (When I asked their support people about this they said that it was a feature they would manually add to my account, and in the future make it a feature for everyone – which is a pretty promising bit of customer support action.)
Those are the basics – you can check out the options and pick the ones that make the most sense to you. I’m currently using Payloadz with Paypal and Google Checkout, hosting my own files, previewing with PlayTagger, and dumping the many millions of dollars that I make every day into a few different ING accounts, downloading everything into Quicken so I can keep track of it all. But I’m also in the process of thinking pretty seriously about switching to e-junkie. From what I can tell their commissions are much smaller and the service seems to be about the same. That’s the nice thing about all this stuff – it’s pretty easy to get started with any of these options, so you can try everything and stick with the stuff that works.