Spotify announced its decision to increase subscription prices in France as a countermeasure to a recent tax imposed on music-streaming services in the country.
This action follows the company’s previous intention to start divesting from France, beginning with withdrawing support from two festivals with a promise of additional actions to come. Now, more details have surfaced regarding Spotify’s response.
The tax went into effect on January 1, requiring a 1.2% levy on Spotify and competing services like Deezer, Apple Music, and Google’s YouTube Music. The proceeds will be channeled to the Centre National de la Musique (CNM), established four years ago to support the French music industry. While all affected companies oppose the law, Spotify has been the most vocal due to its prominent position in the country.
Price Adjustment
Spotify has not disclosed the exact amount of the price increase but stated that French users would pay the highest subscription fees in the European Union (EU). The company intends to notify subscribers of the additional costs “in the coming weeks.” Although part of the strategy may involve generating consumer dissatisfaction to pressure authorities, the law is now in effect with no immediate changes expected.
In a blog post today, the company expressed:
“With the introduction of this new tax, Spotify would have to allocate around two-thirds of its earnings to music rights holders and the French government. This substantial amount is unsustainable for our business. As we have consistently emphasized, we cannot absorb additional taxes.”
A spokesperson from Spotify informed TechCrunch that the aim was to be transparent with users about the upcoming price hike, noting that every effort was made to avoid this scenario.
Market Significance
The incident underscores France’s importance to Spotify in terms of market presence. The company’s response contrasts with its approach in Uruguay, which is also progressing with a similar legislation seeking fair compensation for artists. Initially threatening to exit Uruguay due to concerns about double payments to rights holders, Spotify reconsidered upon receiving government assurances. In the case of France, despite expressing discontent with the tax akin to Uruguay, Spotify has not signaled an intention to leave the market. Rather than exit, the focus is on raising prices to offset the tax burden.
In December, Spotify announced the discontinuation of support for Francofolies de la Rochelle and the Printemps de Bourges festivals. The decision to increase subscription fees signifies another step in response to the tax, as Spotify aims to mitigate the financial impact.
