The Government will impose a tax on audio streaming in 2024. But some platforms like Spotify and Deezer say they cannot afford to pay it. Result: subscription prices should once again increase.
Music lovers will have to check out! The Government announced to AFP on December 13, 2023, the implementation from 2024 of a tax on the turnover of online music listening platforms. A way to finance the National Music Center (CNM), a public establishment created in 2020 to support music and variety professionals. muscla streaming services will be required to contribute to the sector with a “very low rate of levy on the turnover of the platforms”. The exact terms of the tax have not yet been revealed, nor the annual amount it should bring in. The fact remains that the solution does not only make people happy, starting with Deezer and Spotify, and which could turn against subscribers.
Audio streaming tax: a contribution of 1.75%?
Debates around the issue began in autumn 2022, when NUPES deputies proposed, via amendments which were rejected, a compulsory contribution of 1.5% of revenue from paid subscriptions on music platforms to help the National Music Center to support French creation. Also, Senator Julien Bargeton (Renaissance) was entrusted with the mission of knowing how to sustainably finance the music industry. During six months, he carried out around a hundred auditions with more than 250 professionals “to listen to what the world of music had to tell us”according to Radio France.
This report of around a hundred pages, which was delivered on April 20, 2023, recommends the establishment of a tax of 1.75% on revenues generated by music streaming subscriptions as well as on those generated by advertising – for free subscriptions. A figure therefore higher than that mentioned by NUPES. According to Julien Bargeton, this “streaming tax” could bring in nearly 20 million euros. Classical music should also contribute to this tax by bringing in 6 million euros. Note that live entertainment – in particular live music – is currently taxed at 3.5% on ticketing and that, according to the report, this rate should be lowered to 1.75%, i.e. the same level than the streaming tax for the sake of fairness. The senator believes that the CNM “must now be fully deployed to enable it to fulfill its vocation of bringing together the music industry, from live performance to recorded music”. It is about “French cultural sovereignty“, the music sector having already been shaken by the Covid crisis.
On June 21, on the occasion of the Fête de la Musique, Emmanuel Macron announced that the project was now underway, as reported BFMTV. He thus asked the Minister of Culture Rima Abdul-Malak to bring together “without delay all players in the sector”wrote the Élysée in a statement. If no agreement has been reached with these companies regarding the financing and remuneration of artists before September 30, “the Government should reserve the possibility of submitting to Parliament a compulsory contribution from streaming platforms”. This new funding would be necessary to “preserve French cultural sovereignty” and offer “fair remuneration for artists and creators”.
Audio streaming tax: a measure that divides the sector
The Government’s measure generated strong reactions, sharply dividing the music sector. Jack Lang, former Minister of Culture, had already welcomed the idea of such a tax last August, describing it as “a measure of justice which will reinforce musical diversity and strengthen independent creators and musicians”. Several organizations representing the music industry (Prodiss, UPFI, SMA, etc.) are in favor of such a low tax. “which could be sufficient to complete the CNM’s financing scheme without disrupting economic models”. “We are delighted that the government has taken this decision, supported by deputies and senators,” reacted its general director Malika Séguineau de rodiss, believing that it was “the only system which allows us to provide the CNM with sustainable and balanced financing”.
But not everyone is of this opinion. If the SNEP (National Union of Phonographic Edition) and La Scène independent – which represents around 400 structures – had welcomed the announcement “a consultation without delay of the players in the music sector in order to define a source of financing respectful of its major economic balances”, they criticize the fact that this tax would give a considerable advantage to American competitors. Indeed, European companies, including Deezer and Spotify, would be forced to increase their prices to keep their heads above water, while we are in a period of inflation. “The streaming situation remains fragile. French and European platforms whose economic model is centered on the distribution of music have not reached the profitability threshold. They also operate in a less dynamic market here than in other large countries music, in a context of increased competition and uncertainty about artificial intelligence”.
Those in the rap world also don’t see things favorably. They feel particularly targeted by this tax and are afraid of being harmed. “No to the streaming tax. Anti-rap tax. Racist tax. Unjustified tax”, denounced rapper Niska at the time. Rap remains one of the most streaming-dependent styles of music. Online listening represented more than 87% of the consumption of rap albums in the Top 200 France in the first half of 2020, according to the SNEP. In comparison, only 17% of variety is streamed, as is 38% for pop. However, rap represents a considerable part of French musical production. At the start of 2020, 85% of so-called “urban” songs in the Top 200 Albums were French productions, compared to 55% for pop, 60% for electro/dance and 20% for rock. Consequently, rap risks being the register which will contribute the most to the financing of the CNM.
Tax on audio streaming: subscribers will have to checkout
But this tax could well turn against users. Stéphane Rougeot, the deputy director of the number two streaming service in France, spoke on the subject to BFMTV last August. He denounced a “anti-Deezer tax” because it would hit the service “totally disproportionately compared to other platforms”. In fact, it generates 60% of its turnover in France, compared to less than 3% for its competitors, such as Spotify. Therefore, he would pay much more than the latter. “At a time when the issues of sovereignty, whether digital or cultural sovereignty, are quite strong issues, Deezer, [qui est] a French platform, would find itself much more hit and much less competitive”assured Stéphane Rougeot.
Unable to pass on the tax to the rights holders – this is not provided for in the contracts – and not being able to absorb it either due to its fragile financial balance, Deezer has already announced that it will not ‘will have “no choice” to increase the prices of its subscriptions. And it’s hard to believe that other platforms won’t follow suit, especially since Apple Music, Spotify and YouTube Music have all increased their prices in recent months. For a tax supposed to be “painless” for consumers, to use the words of Julien Bargeton, we will go back…
For its part, Spotify also expressed its dissatisfaction. “The adoption of this tax is really a blow to the music sector, to innovation and to European independent platforms like Spotify or Deezer”regretted Antoine Monin, the general director of Spotify France, on franceinfo December 14. Indeed, according to him, this decision “plays into the hands of GAFA”, who have the means to absorb the taxes. “We pay 70% of our revenue to music rights holders, you add to that a VAT at 20%, a tax on digital services at 3%, a tax on video services at 5% and now a streaming tax at 1.75%. How do you expect us to be able to operate in a market like France?” It’s quite simple, if the tax sees the light of day, Spotify will disinvest in France. Antoine Monin suggests that instead, it is the entire sector that contributes — sales of vinyls and CDs, music radios, etc.