France’s Music Streaming Tax Will Be Watched By Other Nations

Music streaming platforms, especially Spotify and Deezer, are in an uproar over France’s proposal for a new music streaming tax. This could be a precursor for other countries trying the same thing, but it could also backfire on French government as well.

The proposal calls for a 1.75% tax on music streaming, which doesn’t sound like much at first. The problem is that streaming is a very low margin business, as companies already pay 70% of their revenue to music rightsholders, a 20% VAT, a 3% tax on digital services, and a 5% tax on video services. When you’re living on a 7% margin, most of which is already taken up by operating costs, that doesn’t leave much room for an additional tax.

Unintended Consequences

As Deezer and Spotify have pointed out, the music streaming tax will have a greater effect on European companies than the American tech giants Apple, Amazon and Google (YouTube Music), which could easily absorb the costs since streaming music acts almost like a loss-leader for the companies.

The two options for Deezer and Spotify are to raise prices (Spotify indicates that it would be about 10%), which puts them at a disadvantage against the big tech music services, or de-emphasize or even not offer service in France.

This is pretty counterproductive as Deezer is a French company, which would normally expect its government to help rather than hinder its business. Ironically, the tax is aimed at funding the Centre National de la Musique, which is designed to help train and support French musicians.

The proposed tax was approved by the French Senate in November to be included in the 2024 budget. You can bet that if the country gets away with adding the tax with few repercussions that other countries will take note and add their own additional taxes as well. Some might argue that this is the best kind of tax as it’s on a luxury non-essential service, but music fans will just think it’s the “greedy music service” that’s trying to shake them down for more money.

This is one that bears watching in 2024.