Yesterday Spotify issued a statement lashing out at the introduction of a streaming levy in France which will, they said, “impede our ability to operate in France”. As a result Spotify subscribers in the country will “soon experience a price increase due to additional costs on music streaming services imposed by the government” meaning that “French users will now pay the highest subscriptions across the European Union”.
In a blistering attack on the Centre national de la musique - the French government-backed organisation that will administer revenues generated from the new levy - Spotify made a number of startling statements about how and where money from the levy will end up.
A key claim made by Spotify is its “worry” that the “CNM tax” will “not go directly to artists, nor will it have a tangible output visible to fans”. This is absolutely not the case, says the CNM. In a statement issued this morning, the organisation states, “the proceeds of the levy are invested entirely in financial aid programmes that sustain grassroots, diversity and international development for French music”.
Contrairement à ce qu’indique Spotify, pas un centime de cette ressource ne finance le fonctionnement du CNM : le produit de la taxe est intégralement investi dans les programmes d’aides financières que l’établissement déploie à destination des projets des artistes et entreprises de la musique pour soutenir l’émergence, la diversité et le développement international de la musique française.
Spotify also highlighted the fact that the levy will generate €15 million - a figure it then placed alongside a statement that the CNM’s “administrative budget” is €20.2 million. It was therefore heavily implied - but not openly stated - that the €15 million generated by the levy would simply be used to offset administrative costs.
Again, not true, says the CNM. “Contrary to what Spotify says, not a single cent of the levy will be used to fund the CNM’s operations”. Spotify is not only incorrect, but also misrepresenting the figures, the CNM adds, saying that the €20.2 million sum “does not correspond to the CNM's administrative budget but covers the resources allocated by the institution to non-financial schemes for music professionals”, which include training for artists and their teams, career resources, advisory services, promotional resources and other activities.
Why is Spotify being so bombastic?
Various sources who have talked to CMU over recent months have questioned why Spotify has been so bombastic in its criticism of both this levy in France and also the introduction of equitable remuneration on streaming in Uruguay.
As previously reported, in France Spotify said that the tax would mean it would have to “disinvest” from the country, and shortly afterwards it pulled financial support from a number of French festivals. In Uruguay it said that it would pull out of the country entirely, going as far as to disable new account creation for customers based in the country, as well as emailing existing Uruguayan Spotify subscribers to tell them it would be shutting down its service on 1 Feb 2024.
Sources from the independent sector who spoke to CMU at the time highlighted the fact that the Spotify licence agreements that they had seen make it clear that the streaming service would not have to cover the cost of ER on streams in Uruguay, with that liability falling on labels. Therefore the only reason that equitable remuneration would make its business unsustainable was if the major labels had different terms.
Of course, Spotify did not shut down its service in Uruguay and issued another statement saying that after “clarification” from the country’s government it would continue to operate.
A recurring refrain in statements issued by Spotify over the last year is that any external changes to the model - equitable remuneration on streams, levies on revenues - makes their business unsustainable.
France's music streaming levy should be no surprise to a company like Spotify
Similarly, Spotify tends to position itself as being surprised by the imposition of legislative change. Yet, as CMU reported earlier this week, Spotify has a significant lobbying operation in the EU and has held dozens of meetings with MEPs and the European Commission in recent years. Sources familiar with the company’s public affairs and lobbying operations say that it is similarly engaged with the political infrastructure at national levels in key territories.
So is Spotify really so surprised by these changes and is it really as outraged as it seems - or is something else driving its stance here?
If the introduction of the levy in France was really the huge blow Spotify claims, then this suggests a number of different things. If the 1.2% levy is such a “massive amount” that it makes their French operation unsustainable, then this should, perhaps, be a matter of concern for Spotify shareholders - more on that point shortly. Furthermore, with a sophisticated lobbying and public affairs operation it seems somewhat unlikely that Spotify would not be able to anticipate the implementation of a levy like this in France.
Indeed, on 13 Dec 2023, Spotify, Apple, Deezer, YouTube, Meta and TikTok announced that they would make a voluntary contribution to the CNM amounting to €14 million, in a bid to convince lawmakers that no formal tax was required.
A week earlier, influential French music executive Pascal Negre - former boss of Universal Music France, Chair of French collecting society SCPP and founder of indie label 6&7 - wrote an op ed for the influential French broadsheet newspaper Le Monde saying that a voluntary contribution was “not up to the job” and that abandoning a formal levy in favour of a voluntary contribution “would be tantamount to handing the keys to French music policy over to platforms and labels”.
That piece in Le Monde seemingly resonated strongly with legislators. According to sources familiar with the negotiations, at 3pm on 13 Dec the platforms - including Spotify - believed that their proposal for a voluntary contribution would be ratified. But just three hours later those same platforms were apparently informed that the voluntary proposal would be abandoned and the levy would be implemented instead.
It was, say those sources, this sudden 180 degree change that may have sown some of the seeds of discontent that resulted in Spotify’s bombastic approach. It has also been suggested that recent rumours circulating in France, and the French music industry, may have partly driven Spotify’s most recent statement.
These rumours apparently included statements that Spotify would “never” raise its prices and contradictory statements saying that a price rise would be implemented in a few days time. With so much uncertainty, suggest some sources, Spotify felt it had to make a statement.
Is there something else going on here?
Why it was necessary to give the CNM such a kicking in the process is unclear, however. People within the French industry who - understandably, did not want to be identified - told CMU that there is sometimes a “significant disconnect” between the “more traditional parts of the French industry” and the platforms, with each side viewing the other with suspicion.
There is, said one commentator, significant frustration on the part of platforms like Spotify, who see the CNM as overly traditional and an obstacle to true innovation, while those on the other side see Spotify and other platforms as placing no significant value on the cultural economy of France.
However, it’s clear that there is also a wider context, which is that, quite possibly, the legislative forces Spotify faces - in France, but also across Europe and beyond - may be genuinely disastrous for its business.
Anyone familiar with the operating landscape of cultural levies in Europe would have told Spotify that a levy on music streaming companies was not only to be expected, but was pretty much inevitable. A full decade ago France said that it was going to extend an existing levy on broadcasters and distributors of TV and video content to include Netflix and other streaming video content providers. That levy kicked in in 2018.
The roots of this levy go back much further though. In 1993 France introduced a levy on films distributed on VHS and DVD - and before that, in 1985, France introduced remuneration for private copying. Initially this levy was applied to sales of blank cassette tapes, but as time - and technology - progressed, it was extended to cover blank CDs and other recordable media, and now even extends to smartphones and tablets.
In the Netherlands, Belgium, Poland, Germany, Croatia, Czechia, Romania, Slovakia, Italy and Spain there are also levies that apply to streaming video providers.
In Sweden, where Spotify was founded, there are not currently any levies placed directly on on-demand streaming platforms. Sweden does, however, charge a private copying levy covering offline use of streaming services based on the fact that, technically, a copy is made and placed on the device for offline listening - and calculation of this levy is based on data reporting from Spotify Sweden, though the levy itself is paid by device manufacturers.
If those same European countries that have implemented levies on SVOD providers extend their measures to include music streaming services this could have a significant impact on Spotify.
The company is keen to point out that, unlike some of its competitors in the music streaming market, it is entirely reliant on its premium subscription business to sustain itself. Apple, Google and Amazon’s music streaming services are not the primary activities of any of the companies, which means they are not so significantly impacted by minor changes to the revenue landscape around music.
Is Spotify really as surprised by the introduction of the levy as it would like people to think? No. Will the money from the levy be wasted on administrative costs? Absolutely not, says the CNM.
Is the CNM a casualty in a bigger battle that Spotify is fighting? Quite probably.
