France's Proposed Smartphone Tax Could Help Music Retailers

Generic Smartphone image - H 2013
Getty Images

Generic Smartphone image - H 2013

Culture Minister Aurelie Filippetti said a fund may be created to aid record stores.

PARIS – France’s proposed new tax on smartphones may end up helping the music industry.

On Friday morning, culture minister Aurelie Filippetti discussed the proposed new one percent tax on smartphones, tablets, e-readers and computers and said the money raised could go to embattled music retailers.

“It could lead to a fund that would finance record stores in difficulty, help the music industry or photographers,” she said, adding in two sectors that are not yet covered by France’s vast subsidy systems that prop up film, broadcast television and bookstores.

“This fee will be paid at the time of purchase. It will be painless for the consumer,” she said. “In the end, it would have a very profound impact on the entire cultural sector.”  Based on 2012 sales of mobile devices, the tax could bring in more than $105 million (€80 million).

The proposal comes on the heels of Virgin Megastores' shutting down of 26 shops across France on June 12. The music and DVD retailer first went into bankruptcy in Jan., with a court finalizing its liquidation June 17. As the chain announced the closures, employees occupied eight stores nationwide, including the flagship Champs-Elysees outlet, camping out and protesting for the past ten days. 

STORY: France Mulls Smartphone and Tablet Tax to Fund Culture

Virgin inked a final deal with the protesting workers Thursday ensuring the end of the retailer in France – the same day that former competitor Fnac debuted on the stock market after being spun off from the newly-christened Kering. Kering (formerly PPR) has been eager to unload the chain as it refocuses on its profitable fashion and luxury goods brands. On the first day of trading, the DVD, book, music and video-game retailer lost 10 percent by the closing bell, a sign that investors are wary of a brick-and-mortar outlet as entertainment becomes increasingly digital.

Fnac launched a digital download music service in 2004, but closed it last year after it failed to achieve much market share. The homegrown Fnac still has 80 stores in France, but its revenue has declined every year since 2008. In 2012, sales fell 2.4 percent to $5.4 billion (€4.1 billion).

With the stock offering, Fnac is trying to stabilize itself in the rocky economic waters of a still recessionary France and stave off competition from online retailers such as

France’s music stores aren't the only ones singing the blues. Entertainment retailers around the world have been hard hit by the combination of the recession and digital download growth, including the UK’s struggling HMV, which went into bankruptcy earlier this year before being bailed out by private equity, and iconic US chain Tower Records, which closed its doors in 2006.

France however wants to protect its retailers. Filippetti was also critical of Amazon’s presence in France; the company had once been welcomed in when it opened distribution outlets in the center of the country, but is now under fire for its tax avoidance practices. This morning, Filippetti said that along with the new tax, the government will take measures to prevent free shipping and deeply discounted products used to undercut independent retailers.