Peppercoin Signs Blue Note and Goes Commercial

Peppercoin Inc., a Waltham, Mass.-based micropayments startup, announced today it has signed on to process payments for Blue Note Records, a unit of EMI Music Publishing. Beginning in the first quarter of 2004, Peppercoin will deploy its technology to handle purchases of single songs from Blue Note's site, www.bluenoterecords.radioplayer.com. The site features a radio player visitors can listen to for free, and up to now has taken orders for compact disks. With Peppercoin, it will for the first time offer listeners the ability to buy single songs for 99 cents each as they listen. Blue Note is known especially for its jazz recordings. Peppercoin also announced today it is emerging from its 3-month test phase and offering a fully commercialized service. Its long-term goal is to license its system to acquirers to sell to micromerchants. The company relies on credit card payments and a proprietary software program that selects micropayments, or transactions for as little as 50 cents or so, according to a mathematical model. The model assigns a much larger dollar value to each selected transaction, avoiding the inefficiency of credit card interchange and processing fees. The company's software builds on the mathematical work of co-founders Ron Rivest and Silvio Micali. On each transaction, Peppercoin takes a fee of from 7 to 9 cents. In the online music market, licensing fees usually consume 65 to 80 cents of a 99-cent sale, with transaction costs eating up the balance. On Monday, in another development related to the burgeoning online music market, payments processor PayPal announced it was cutting its fees dramatically for by-the-song online music transactions. “This validates that there's real need (for an efficient micropayments transaction model),” says Rob Carney, vice president of marketing at Peppercoin. “Clearly, a big player is saying that too.”