(Hypebot) — Music streaming platforms, in particular Spotify And Deezer, are in turmoil over the French proposal for a new tax on music streaming. This could prompt other countries to do the same, but it could also backfire on the French government.
by Bobby Owsinski of Music 3.0
The proposal calls for a 1.75% tax on streaming music, which doesn’t seem like much at first glance. The problem is that streaming is a very low-margin business, since companies already pay 70% of their revenue to music rights holders, a 20% VAT, 3% tax on digital services and 5% tax on video services. When you’re living on a 7% margin, most of which is already absorbed by operating costs, that doesn’t leave much room for an additional tax.
Unintended consequences
As Deezer and Spotify have pointed out, the tax on music streaming will have a bigger impact on European companies than on American tech giants. Apple, Amazon And Google (YouTube Music)which could easily absorb the costs since music streaming almost acts as a loss leader for businesses.
The two options for Deezer and Spotify are to either increase prices (Spotify says it would be around 10%), which would put them at a disadvantage compared to the big tech music services, or to decrease the importance or even altogether. not offer a service in France.
This is quite counterproductive as Deezer is a French company, which would normally expect its government to help rather than hinder it. Ironically, this tax aims to finance the National Music Center, which aims to contribute to the training and support of French musicians.
The proposed tax was approved by the French Senate in November for inclusion in the 2024 budget. You can bet that if the country manages to add the tax without any repercussions, other countries will take note and add their own additional taxes as well . Some may argue that this is the best form of tax because it applies to a non-essential luxury service, but music fans will simply think that it is the “greedy music service” that tries to convince them to get more money.
This is one worth watching in 2024.
Bobby Owsinski is a producer/engineer, author, blogger, podcaster and coach. He is the author of 24 books on recording, music, the music business and social media..
