EBay’s PayPal, Microsoft Move Payments to Xbox Game Consoles

EBay Inc. (EBAY)’s PayPal business will expand its partnership with Microsoft Corp. (MSFT) to let consumers buy virtual goods over its game consoles, part of an effort to lure more users to its payment products.

PayPal customers will be able to purchase goods over Microsoft’s Xbox 360 game consoles, the company said today at EBay’s developer conference in San Francisco. PayPal expects $4.7 billion in payment volume for digital goods this year, compared with $3.4 billion in 2010.

“It’s symbolic of us moving beyond just the browser as a payment experience,” Carey Kolaja, senior director of emerging opportunities at PayPal, said in an interview.

EBay, based in San Jose, California, is vying for a share of a video game industry that will generate about $30 billion in software sales worldwide this year, more than half of that through consoles, said Colin Sebastian, an analyst at Robert W. Baird & Co. in San Francisco. Content purchases on TVs and game consoles are a “huge” opportunity if PayPal can integrate the technology in a way that is simple to use, he said.

PayPal also will provide new ways to pay for content with partners such as the Financial Times and News Corp. (NWSA)’s Wall Street Journal, and will team up with Blizzard Entertainment Inc. in gaming and Spotify Ltd. in digital music, the company said today.

Easier Payment

Allowing customers to log in and pay with a user name and password rather than interrupting a game to enter credit card information is something PayPal has that other companies don’t, said Gil Luria, an analyst at Wedbush Securities Inc. in Los Angeles. With more than 100 million users, the company will attract game junkies who want to buy virtual goods, he said.

“Much of the potential for growth for PayPal beyond the Web has to do with its ability to become the preferred payment choice for in-product purchases such as Zynga’s games -- FarmVille, CityVille,” where more than 90 percent of revenue came from virtual goods, Luria said.

As it moves more services from personal computers to devices including mobile phones and tablet computers, PayPal could expand revenue 10-fold to more than $32 billion from its shift into advertising, said Richard Crone, head of research firm Crone Consulting LLC.

PayPal has done an independent study on the benefits of expanding into commerce over televisions, and will announce the results later this year, the company said. More conceptual ideas, such as paying for food in a car before reaching a drive- through window, or adding payment options to navigation systems are possibilities that will depend on consumer demand, Kolaja said.

T-commerce Growth

“We’re creating the tech stack and the platform to go onto any device, whatever the market may dictate at a given time,” Kolaja said. “Is ’t-commerce’ going to be a growth area in the future? I tend to think it will,” she said, referring to paying for products over televisions.

Today’s announcement is an extension of PayPal’s effort to make payments easier in a number of mediums. For local retailers, the company is rolling out products that will let consumers pay through a mobile phone application, by swiping a card or by entering a name and PIN number at the point of sale in a store, said Sara Gorman, a PayPal spokeswoman. The company will test the products with a “major” retailer by the end of this year and introduce them more extensively in 2012, she said.

While PayPal’s system would be simpler to use in television commerce than entering credit card information, competing with companies such as Google Inc., the largest Internet search company, and Visa Inc. (V), the biggest payments network, won’t be easy, Luria said.

“It’s not that much of a stretch to be able to do that on the TV,” Luria said. “You’re starting to see that functionality come. PayPal isn’t going to be the only one who does it.”

To contact the reporter on this story: Danielle Kucera in San Francisco at dkucera6@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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