Peppercoin Scores Another Online Song Merchant

Peppercoin Inc., the Waltham, Mass.-based provider of software to process very small online transactions like payments for 99-cent songs, has signed up another new client in the red-hot market for online music. Smithsonian Folkways Recordings, a non-profit record label belonging to the Smithsonian Institution, announced it had signed on with Peppercoin to process payments for the label's new song service, which it will introduce in April. The label this month began digitizing its music collection, which includes 33,000 songs, many by American folk artists like Woody Guthrie and Pete Seeger. The Smithsonian's online service will sell individual songs for 99 cents, and by the end of the year will include music from Africa, India, and other areas of the world. The Smithsonian label sold more than $4 million worth of recordings in 2002, the most recent year available, a 36% increase from the year before. By offering the music online at 99 cents a song, the label hopes to “reach out to a broader audience,” it said in a statement released today. Peppercoin, which introduced a commercial micropayments product last month, has already enlisted Blue Note Records, a notable jazz label, as a client in the online music market. To overcome the inherent inefficiency of incurring credit card transaction fees on small-value transactions, Peppercoin's system relies on a proprietary mathematical model to make one large transaction from multiple consumers stand in for randomly selected micropayments. In this way, a 99-cent song carries a 7-cent transaction fee rather than 28 cents. The pay-as-you-go system also eschews the prepaid accounts micropayments processors often rely on to get around the inefficiency of transaction costs. The startup cites a recent survey that shows consumer demand for online micropayment capability may be rising. The survey says more than 4 million Americans have bought digital content for $2 or under in the past year, and 30 million are at least somewhat likely to buy online content at that price in the coming year.