Why Spotify is unhappy with France's Streaming Service tax?

Spotify has pulled out of two French music festivals following the announcement of an increased tax measure on music streaming platforms in the country.

The Swedish music streaming company has said it will no longer support the Francofolies de La Rochelle and the Printemps de Bourges festivals from 2024 onwards due to the new tax law.

New Tax measure on the Music Streaming Services

France, the sixth largest recorded music market in the world, is proposing to tax the?best music streaming services?in order to fund the development of new artists –?and the streamers aren't happy.?

The tax rate is 1.2%?on the French turnover of large streaming firms such as Spotify, Deezer,?Apple?Music and?YouTube?Music.

The estimated total tax take in France of the levy has been estimated at €15 million a year from all streamers combined;?

The French government is concerned with the effect of Big Music on the wider cultural landscape. It's taxing the firms in order to invest in the next generations of artists too –?artists who have seen streaming effectively destroy their ability to make money from recording and releasing music.?

Why Spotify is against the new law?

Spotify says that despite making €65 million profit in its last quarter, they are in a fragile financial balance. And a tax levy will further destroy them. ?

Spotify has lost money consistently for years because streaming is fundamentally a low margin business. Spotify reckons that in France it pays 70% of its revenues to music rights holders, 20% in VAT, and 8% in other streaming taxes. And unlike some of its rivals, such as Apple and?Google, streaming is its entire business rather than just part of it.?

But that hasn't been helped by Spotify's push to become a podcasting company as well as a music one. That push has been extremely expensive, with over $1 billion spent on podcast deals with celebrities including Kim Kardashian, Joe Rogan and Michelle Obama, and while it's generated significant subscribers it's also lost the firm an enormous amount of money –?losses that have in part led to the firm laying off 17% of its workforce in its third round of layoffs this year and pledging to stop paying royalties on tracks by its more obscure artists –?artists whose songs,?by some estimates, account for nearly two-thirds of its entire streaming catalog.

So any levy will reduce its already-thin margins.?

While the streamers are very much against it,?organisations?such as the French live music association PRODISS, independent label umbrella group FELIN and the Union des Producteurs Phonographiques Fran?ais Indépendants are very much in favor.

Voluntary contribution instead of a “Tax”

Opponents of the tax for their part pleaded for a voluntary contribution, which includes Apple, Deezer, Meta, Spotify , YouTube and TikTok.