Music streaming giant Spotify announced today (March 7) that it will be raising subscription prices in France in response to the recent implementation of a new government tax on music streaming services.
This decision comes after months of contention between the company and the French government, with Spotify arguing the tax unfairly burdens consumers and hinders its ability to operate in the market.
French President Emmanuel Macron in mid-December confirmed the proposed tax on streaming services, with local French media reporting that the tax will fund investment in the Centre National de la Musique (CNM), created in 2020 to support stakeholders across the music sector.
The tax will target major streaming companies with annual sales exceeding €20 million (approx. USD $22 million). Initially proposed at a higher rate of 1.75%, the tax was ultimately set at 1.2% of sales, according to earlier reports.
Spotify and its rival, Deezer, have already slammed the proposal, with Spotify France’s Director General Antoine Monin labeling it as a “monumental strategic error, which goes against the issues of economic, cultural and European technology.”
“While we worked very hard to encourage the government to avoid adding this tax, unfortunately they decided to move forward.”
At the time, Monin said no decision had been made regarding a potential price increase, although the executive had said that if an adjustment was needed, it could result in a 10% increase in subscription prices.
Spotify had also started “disinvesting” in France, pulling support for two music festivals in a sign of protest.
Most recently, in a blog post published today, Spotify said: “While we worked very hard to encourage the government to avoid adding this tax, unfortunately, they decided to move forward.”
Spotify also expressed concerns about the tax’s effectiveness and its impact on both the company and its users, saying, “Our worry, on top of what would be equivalent to a double payment on our part, has been that this tax will not go directly to artists, nor will it have a tangible output visible to fans; instead, it will simply come at the expense of listeners, and create an additional middleman – the CNM.”
“With the creation of this new tax, Spotify would be required to give approximately two-thirds of every euro it generates to music to rights holders and the French government… As we have long said, we simply can’t absorb any additional taxes.”
The Sweden-headquartered music streaming company highlighted its existing contributions to the French music industry, stating that it distributed nearly €225 million ($245m) to rights holders in the market in 2022 alone, equivalent to about one-fourth of the French recorded music industry revenues for that year.
France, the world’s sixth-biggest music market, generated recorded music revenues of €920 million (USD $967m) in 2022, according to local trade body SNEP.
Spotify further argued that the CNM’s administrative costs consume a significant portion of its budget, raising doubts about the amount of funding ultimately reaching artists.
“Our concern is that possibly less than half of its overall €146.9 million ($160m) budget will find its way toward effectively aiding music,” Spotify said.
With the imposition of the CNM Tax, Spotify claims it would be required to dedicate a substantial portion of its revenue to rightsholders and the government, leaving the company with an unsustainable business model. This situation, according to Spotify, led to its decision to raise subscription prices in France.
“With the creation of this new tax, Spotify would be required to give approximately two-thirds of every euro it generates to music to rights holders and the French government. Of course, this is a massive amount and does not allow for a sustainable business. As we have long said, we simply can’t absorb any additional taxes,” it said.
Spotify added that despite making budget cuts in its artist marketing and its support of French music festivals, the tax “still continues to impede our ability to operate in France”.
The company said it will need to make changes to its price plan in France over the coming weeks and months. This price hike will make Spotify subscriptions in France the most expensive among all European Union member states, it said.
While the exact details of the new pricing structure haven’t been disclosed yet, Spotify has assured French subscribers that they will receive further information soon.
It remains to be seen how this latest development will impact the French music streaming landscape. With Spotify, the market leader, raising its prices, users might explore alternative platforms, potentially affecting the overall market share.
In December, Spotify reversed its decision to leave Uruguay after the government clarified recent changes to music copyright laws. The streaming giant previously threatened to exit the country due to concerns that the proposed changes would force them to pay for music licensing twice.
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