Snep Blames Burners For Sales Drop

France's Negre Calls For Levy On Blank CDs, Lower VAT Tax
This story was prepared by Emmanuel Legrand of Music & Media.

CANNES-Home piracy, fueled by use of CD burners, is to blame for a 15-year low in French record sales, says industry body SNEP, which says it may look at taking legal action to force the government to act in defense of the local industry.
Music sales in 1999 fell 2.5% in value, to 7.45 billion francs ($1.13 billion), and 4.5% in units, compared with those in 1998, according to figures unveiled by SNEP during Midem. The drop in sales affected mostly singles, which fell 9% in units and 6% in value, but album sales also dropped for the first time since the introduction of the CD in the mid-'80s-down 2.5% in value and 3% in units. In previous years, the market grew in value by 3% (1997-98) and 8% (1996-97).
SNEP president Pascal Negre says these are "the worst figures in 15 years" and puts the drop in sales firmly down to home piracy. "Since the introduction of CD burners, 75% of the consumers have changed their consuming habits-some reduce the amount of purchases, others simply stop buying CDs. If we don't move fast, there will be a dramatic drop in sales in the next few years."
Negre announced that SNEP is to launch an awareness campaign aimed at young consumers in March, highlighting that CD burning is in fact stealing from artists. Negre's comments are strengthened by the results of a survey made at the beginning of the year that shows 35% of CD buyers aged 12-34 own "burned" CDs and that 32% of regular CD-single buyers have stopped buying prerecorded products since the introduction of CD-R. In addition, 28% of CD album buyers own copied discs.
SNEP is also asking for the government to act at several levels. Negre wants the government to lower the value-added tax (VAT) rates on records, currently at 20.6%, a measure that needs approval from European authorities and that, if approved, would result in a lower retail price. "It is about time the government acted on this issue," adds Negre, noting that France will hold the European Union presidency in the second half of this year. Fran‡ois-Henri Pinault, chief executive of retail chain FNAC, has also pleaded for a lower VAT.
Reflecting industry frustration at the government's inaction and the Ministry of Culture's failure to consider the music sector's needs, Negre warns that should the government choose not to act on VAT, SNEP will look at legal options to force it to do so. "If you buy a record through the Internet, you will rarely pay VAT, whereas when you buy a record in a shop, you have to pay 20.6% VAT. This is a blatant case of unfair competition."
The introduction of a levy on digital blank products would also help compensate the industry for its loss in revenue, Negre says. "This is urgent-each day lost represents losses for the industry." He proposes a $2 levy on blank CD-Rs as acceptable but says that it is unlikely that the issue could be resolved by the French government acting alone; it would require EU approval to succeed.
Responding to Negre's comments, Minister of Culture Catherine Trautmann said in Cannes that she intends "to put music high on France's agenda as president of the EU."
Other 1999 French market highlights:
€ In market share, Universal is the largest record company in France (34.3%), followed by Sony Music (30.4%), EMI/Virgin (17.6%, with Virgin accounting for 10.8%), Warner Music (6.7%), and BMG (6.2%).
€ Only 258 records were certified (silver, gold, or platinum) in 1999, against 320 in 1998, affecting mostly albums. However, the number of new local artists receiving album certifications has grown from 11 in 1998 to 18 in 1999.
€ The best-selling single was Lou Bega's "Mambo No. 5 (A Little Bit Of . . ." (BMG); the best-selling album, Francis Cabrel's "Hors Saison" (Columbia).
€ Local repertoire now accounts for 54% of total sales, with international repertoire dropping 9% to 39% and classical slightly down at 7%.