Tipping for Musicians: A Fast and Easy Guide

by Robert Nagle, idiotprogrammer

  1. Introduction to Tipping
  2. Using Paypal
  3. Using Amazon Honor System
  4. Using Musiclink
  5. A Comparison of Tipjar Fees
  6. Recommendations
  7. Do Tipjars work? What are the Risks?
  8. Resources

Introduction to Tipping

The purpose of this page is to explain very simply how musicians can set up online tipping.

Setting up online tipping is really easy. After you decide what you want, it takes less than 20 minutes to set everything up. After you have set things up, basically all you need to do is add a line or two of HTML to your website (preferably the page containing your mp3 downloads). To set up online tipping, you basically have three options: Musiclink, Paypal and Amazon honor system. Each have their own advantages and disadvantages from the standpoint of ease and quality of service.

Using Paypal

Paypal is probably the most widely known service for online payments and fairly well-trusted. In their section on setting up online tipjars, they include a technical overview, a donations manual and an online wizard that creates the html code and graphics for your specific account which you can cut and paste on your website. The complicating factor is understanding the types of paypal accounts and whether you incur withdrawal fees. A helpful chart about Paypal fees explains the differences between types of accounts and fees incurred. The big difference between Personal Accounts and Business/Premier accounts is that personal accounts are free, but may not receive credit card payments. In other words, a personal account only allows you to receive donations from people using bank cards (NOT credit cards). If you want to receive payments from regular credit cards (and I believe this is what most people want), there is a fee structure which is explained below. Also, note that donations from foreign countries require a transaction fee usually about a dollar. Note that there is a helpful moderated forum which helps people to set up donations on their website. Note that there is no fee for withdrawing money from your balance into your own personal banking account. Paypal is the market leader in the field, though because paypal is not a bank according to a recent court order, it doesn't need to have typical protections for depositor's money. (One nonprofit software group had its paypal donations stolen, and paypal refused to reimburse them). It might be worth checking out paypalsucks for more information.

Using Amazon Honor System

Amazon.com Honor System is a very similiar service to paypal donations. On its faq page, it automatically disburses donations to your bank account every 14 days (something paypal doesn't do). Also, when you start up an account, in addition to providing customized button graphics, it even provides a special webpage specifically on amazon.com to handle any donations to you. Amazon.com is also fairly credible, but it means that people need to have an amazon.com to donate. Amazon.com is easier to use than paypal and has better documentation.

Using musiclink

Musiclink is a nonprofit service that used to be called "fairtunes." It was written about in Time, Playboy and many other places. The biggest advantage to it is that 100% of the donation goes directly to the artist. The catch is that it pays out an amount only when a $20 threshhold is reached. Even though it says that it will "track you down" if donations exceed $20, in fact, it probably would be a good idea for you to register directly with musiclink to ensure that the money gets to you as soon as possible. Unfortunately, the musiclink service never caught on with musicians, and so the website doesn't look particularly professional (and doesn't seem to be regularly updated). Also, the search capabilities for finding artists in the database seem fairly primitive and if you have not already received a donation through Musiclink, a search of your band's name will come up empty. That might scare people off. For that reason, it is probably a good idea to donate a token amount ($1 or $2) just to put your band's name in the database. Because of its nonprofit bent, musiclink isn't yet a household name, so it doesn't inspire the trust of amazon or paypal. Actually, though, musiclink's payment mechanism is through paypal, although the site promises not to impose any fees on the original donation amount (presumably because the donation goes directly to musiclink, which then disburses them to the artists).

Comparison of the Fee Structure: How Much of the Donation Goes to the Musician

Donation Amount Paypal (from U.S.A.) Paypal (From Outside U.S.A.) Amazon.com
Transaction Fee 2.9% + $.30 3.9% + $.30 5% + $.19
$1 $.67 $.66 $.74
$2 $1.64 $1.62 $1.71
$3 $2.61 $2.58 $2.66
$4 $3.58 $3.54 $3.61
$5 $4.55 $4.50 $4.56

Recommendations

For tips under $5, Amazon's honor system is the best way to go. It is easy to use and well accepted. If you expect to receive tips greater than $5 (or 7 or 8 dollars from international donors), you probably should make paypal available for donors. Actually, here's an idea: why not do both! You can explain to tippers to use Amazon for tips under $5 and Paypal for others. Musiclink is a special case; if you expect to receive a lot of tips of varying amounts and feel pretty confident that your tips will exceed $20, you might want to steer people to a nonprofit site like musiclink instead of commercial sites with better service but higher fees.

Do Tipjars Work?

First, regardless of whether they work, it doesn't hurt to try! You will never know how much money you will get until you provide a method for people to tip you. I have wanted to give tips to hundreds of artists whose mp3's I have downloaded from their website or through IUMA or mp3.com. Unfortunately, musicians rarely mention anything about that. If you are waiting to be signed up by a label, then it doesn't do any harm to provide access to mp3's for your fans (or random surfers). Chances are that the majority of downloaders won't tip you, but if they like your music, you may be pleasantly surprised.

Also remember that iMusic only gives you 10% of profits while retaining copyright and locking your content using DRM (Digital Rights Management). Other sites like cdbaby offer slightly more generous royalty payments, but nothing will approach the 90-95% you'll clear using online tipping. Even if you are signed by a label which specifically forbids you from soliciting funds directly, it's doubtful that having had a tipjar before will jeopardize your contract.

Peter DiCola wrote a fairly serious critique of why tipjars for musicians are a bad idea. It is well worth reading. But his criticism doesn't imply that artists should avoid tipjars; he merely thinks that they won't work. Note that I have written a point-by-point rebuttal to every single point Peter DiCola has made .

The big hurdle seems to be that online tipping is not really a habit and that no single artist has made a ton of money with it. But as surfers become more used to using online payment services and as you develop a more direct personal relationship with your fans (through weblogs, email newsletters, etc), you may find that your fans want to tip you. Suppose that 2 million people had your song, and a small percentage (say 1%) tip the artist a trivial amount (say $1). That means that the artist receives $20,000 for one song and a massive following for future songs. (And people overseas sharing your song might cause that income amount to double or triple). Compare this to the current distribution system where less than 5000 U.S. artists sell more than 1000 copies of their CD.

The other problem is that the low-cost music hosting services (like dmusic or IUMA ) don't have built in functionality to allow direct compensation for the artist. A lot of these sites don't even allow URL's to the music group's personal website. To change this situation, make your needs known. Email the music host and let it know you want this functionality.

Resources

sharethemusicday essay
My Share the Music Weblog
Tipjar Success Stories
Future of Music section on tipjars (out of date)

Last Update: December 20, 2003