Money On The Move.

Forget about cash and credit cards. There's a new payment alternative for buying CDs, DVDs and other such entertainment pleasures--your cell phone.

Online payment specialist PayPal, a unit of Internet auction giant eBay, has introduced PayPal Mobile to North America--a wireless version of its service that allows users to buy goods and exchange money using their phones. Already, music heavyweights Universal Music Group and MTV are supporting the technology.

UMG will use PayPal Mobile to sell CDs from the Pussycat Dolls, Mary J. Blige and Daddy Yankee in direct-marketing initiatives. Rollout is imminent. Fulfillment will be handled in conjunction with logistics specialist Justdeals.com. And MTV plans to use it to sell basic merchandise from its Web store including T-shirts and DVDs.

The text to buy codes will be embedded in print, Web and electronic marketing messages.

Transactions are conducted by secure text message. As part of the service, PayPal has established a "Text to Buy" feature for companies that want to sell goods via short codes.

Other big-name media and entertainment brands, including 20th Century Fox Home Entertainment, Bravo and the NBA Store, hope to drive similar impulse buys by offering items for purchase via PayPal Mobile.

"With the overwhelming popularity of mobile phones, the time has never been better for the merging of e-commerce and wireless devices," PayPal president Jeff Jordan says.

To be sure, the opportunity is huge. PayPal claims more than 100 million members.

In addition to purchasing goods, PayPal members can send money to other individuals as well as to participating charities and merchants.

"PayPal Mobile is an important indicator of the broader changes now occurring in the mobile content/payments space," says Ed Kountz, senior financial services analyst with Jupiter Research.

Sophisticated mobile phones can already be used to buy digital products, including music downloads, ringtones, pictures and videos. But the ability to use a phone as a digital wallet for buying physical goods is a new phenomenon in the United States.

PayPal's technology figures to be just one of a number of mobile payment solutions.

Motorola is said to be targeting the market as are startups Obopay and TextPayMe. And credit card companies, including Visa, are testing a contactless payment technology in phones called near field communication, that uses radio waves to transmit transaction data. In the NFC trials, participants use their phones to make purchases at a coffee shop, download a movie trailer in a DVD store, shop from their home TV and buy concert tickets from a smart poster.

"You're going to start to see retailers embrace [mobile] as another payment option," Universal Music Mobile VP/GM Rio Caraeff says.

Analysts say mobile payment technology creates new sales opportunities for the music business including CD pre-orders, ticketing and concert merchandise.

Look for new mobile payment solutions to expand the number of merchants selling digital products for use on phones. In a move unrelated to PayPal Mobile, UMG in May is expected to launch a new premium short-message service that will allow consumers to use codes to buy ringtones, wallpapers and videos for their phones. Billing will be handled by participating carriers including Cingular, Sprint and T-Mobile.

Analysts are divided over what the music business should expect from these new mobile payment options.

"To the extent that digital money doesn't feel like real money, it may increase spontaneous purchasing," says Aram Sinnreich, an analyst with Los Angeles-based research firm Radar Research. However, Sinnreich argues that "carriers have a very simple and transparent billing relationship with consumers, and adding a second billing platform only confuses things."

Kountz cautions it will take 12-18 months to see what traction solutions like PayPal Mobile can gain in North America. "User habits and awareness don't shift overnight."

PHOTO (COLOR): NICOLE SCHERZINGER will see CDs of her group THE PUSSYCAT DOLLS sold via cell phone through new service PayPal Mobile.

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By Brian Garrity