Do you want to start a business modeling Spotify? If YES, here is a complete guide to starting a music streaming service business with NO money and no experience. From a startup in 2008 to 100 million monthly active subscribers in 2017, Spotify has taken its spot on the throne of the music streaming business. Nowadays, owning a smartphone is synonymous with listening to music.
It is very evident that the music streaming business is on the rise, as people do not have to download anything anymore. Spotify is a music streaming and playlist social sharing service that is available in 60 countries. One thing you need to know is that you have to be a registered user first to have access to basic Spotify features for free. Paid Spotify subscriptions grant you full features like downloading, no ads, or hi-fi sound quality in Premium.
Only a decade ago our playlists used to consist mainly of downloaded songs, but today, as the speed of Internet connection increased, we are looking at an era of increased popularity of online music streaming services. Statistics gives a support to this claim by presenting the rapidly-growing number of paid users in digital music streaming.
If you think starting a music streaming service business is uppermost on your mind, you may want to consider using all the information in this article as a guide.
Starting a Music Streaming Service (Spotify) Business
1. Understand the Industry
Reports have shown that the global recorded music market grew by 5.9% in 2016, the highest rate since 1997. According to the report, total revenues for 2016 were US$15.7 billion. Also at the end of 2016 there were 112 million users of paid music streaming subscriptions driving year-on-year streaming revenue growth to 60.4%.
Digital income last year accounted for half of the global recorded music industry’s annual revenue for the first time. Experts believe that the growth in streaming offset a 20.5% reduction in downloads and a 7.6% decline in physical revenue. Streaming is helping drive growth in developing music markets, with China (+20.3%), India (+26.2%) and Mexico (+23.6%) seeing strong revenue growth.
Note that record companies have gingered this increase on revenue through ongoing investment, not only in artists, but also in the systems supporting digital platforms, which has allowed for the licensing of over 40 million tracks across hundreds of services. Trends in this industry show that it is now working towards a return to sustainable growth following a 15-year period during which revenue dropped by nearly 40%.
Just like we said above, in October 2008, Spotify was firstly introduced to the world by two former CEOs, Daniel Ek and Martin Lorentzon as a tiny startup project. A lot of people find it hard to believe that the music app development company Spotify came from Sweden, contributing into a long list of successful innovations, along with Skype (in collaboration with Estonian software developers), King (more recognizable under the “Candy Crush” name) and a few other giants.
The Spotify’s prior function are “music, podcast, and video streaming services; Music can be browsed or searched by artist, album, genre, playlist, and record label. Users can create, edit and share playlists, share tracks on social networks, and make playlists with other users.” Available in 20 locations worldwide, the service was already gaining grounds around the world in 2011 when it hit the point of 1 million paying subscribers. We believe that this amount has increased in numbers since that time in tens of millions.
2. Conduct Market Research and Feasibility Studies
- Demographics and Psychographics
Everybody loves music. Or rather let’s say that most people like songs and our choices of songs differ. The stress in our everyday life is becoming tough and there is no more time to search for various tracks, download them, sort to playlists and all that jazz.
With music streaming service apps, everybody goes online to get an effortless user experience and receive some rhythm in their earphones in a matter of clicks. Mobile devices and stellar speed internet connection only compliment this trend.
3. Decide Which Niche to Concentrate On
Mobile apps have ultimately changed people’s attitude to music, and music listeners have turned to music consumer market. Therefore, music applications are mushrooming in app stores.
When you’re planning to start this business, you need to plan and draw up the route for your business. When speaking about music apps, we don’t always mean the same thing. One person in California can think of a music player, another in Virginia thinks of digital audio workstations. And both of them are right: music applications are as diversified as the music itself. Niches in this business may include;
- Music Streaming apps
- Music Player apps
- Music Identification apps
- Music Download apps
- Music Making apps
The Level of Competition in the Industry
The percentage of people in the united states willing to pay a month for music increased drastically in 2016 and it still have more space for massive additional growth. All told, about 100 million people are believed to subscribe to music services (This doesn’t include free streaming from SoundCloud, YouTube, or Spotify’s free tier).
Joined together, there are 319 million people in the United States alone, and there’s plenty of room for growth. Just look at Apple Music. The service which is available in 113 countries and comes pre-installed on every iOS device, only took a year and a half to reach half of Spotify’s size in terms of paying subscribers.
Now we have Amazon Music Unlimited, which is well positioned to reel in new subscribers at $8 per month for Prime members. Then anytime Pandora finally launches its subscription service, it will have 78 million listeners to potentially convert into paying subscribers, not even thinking of the newfound possibility of expansion beyond the U.S., New Zealand, and Australia (although those plans are still being hammered out).
Bear in mind that streaming music is also breaking free from the shadow of our smartphones and laptops. Thanks to the rise of smart speakers like Amazon Echo, Sonos, and Google Home, more listening is happening at home, making the prospect of treating music like a monthly utility an even more sensible one. This tells you how competitive this industry is and it is still open to a million investors and businesses.
4. Know Your Major Competitors in the Industry
Studies have shown that audio streams grew from 60.4 percent to 144.9 billion streams. It surely shows the growing demand for music streaming apps and a few well-proven and much-loved apps have firmly occupied this niche. Some of the keys ones are explained below.
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Spotify
Spotify music streaming app is in alignment with the two streaming giants – Apple Music and Google Play music. Indeed Spotify has grown big and fast offering a massive selection of music at no cost. Free accounts have some limitations in the number of songs from popular albums or new albums delay and, of course, ads. But anyhow, premium account cancels all the restrictions.
The monthly subscription for premium accounts cost $9.99. This price covers unlimited access to a huge vault of music. Coming to the extra options, users can post to their Facebook pages the music they are listening to. Spotify also suggests a few-tap access to complete libraries of artists, albums, radio stations and playlists even if user’s choice is based on their mood. The distinctive feature of Spotify music streaming is its overall eye-catching experience and usable interface.
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Pandora
Pandora app is also highly competitive in the world of streaming services because of the decent audio quality and great customizable options. The feature that singles Pandora out is that it is based on a recommendation system. This means the user chooses an artist, for example, and the service suggests similar songs using numerous different characteristics like off-beat, tonality, harmony, etc.
Listeners can set their own ‘radio stations’ according to their preferences. The number of such lists can go up to one hundred. Also for subscription price, there is a free account and a premium one for $4.99 per month. Pandora covers iOS and Android platforms, however, is currently available only in the U.S., Australia, and New Zealand.
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SoundCloud
SoundCloud music streaming service is the combination of music streaming service and social media. The service gained its popularity due to some specific features. First of all, as anyone can upload their personal audio files, the platform turns into a great launch pad for young local artistes. It also helps to share recordings in popular social networks like Twitter or Facebook, and blogs or websites using the URL or specific widgets.
Sound Cloud provides a unique opportunity to leave a comment in place of an audio file. One greater feature is that SoundCloud is used by lots of artistes. SoundCloud music streaming apps are available for iOS and Android devices, and users can choose the desktop version. Apps are free to download and offer two tariff plans for paid subscribers PRO and PRO Unlimited.
Indeed the music streaming market is really competitive. The experience of these time-tested music streaming apps shows that if you want to play in the higher league, your app should have some unique features to offer.
Economic Analysis
Spotify is not the only dominating app in this business. Major companies taking lead roles in this business apart from Spotify include: Apple Music, Deezer, Google Play Music and Tidal. All these companies provide their customers with the same bunch of features:
- type of service – music library, cloud storage and radio-embedded
- the range of devices we can listen to our music on
- sharing favourite tracks and playlists
- recommendations and editor’s picks
- searching for our favourite artists/stations
- online/offline modes of listening
In this business, every service and idea appear to be breathtaking because of one single thing – they are priceless, intuitive and easy to use. This is what you should look at if you want to succeed in this business. The cost of developing a music streaming app is very hard to calculate as there are plenty of features you might want to include, and the cost of music streaming service on iOS is always different to the price of Android development due to a wider market segmentation and larger amount of Java-written code required.
Also aside from the hours a development team needs, you need to count up the hours needed for testing – which take around 30% of all the hours calculated for each platform (260 hours for iOS, 300 for Android). You should also know that rates may vary, depending on the service provider, platform and type of contract you choose. Therefore, the average price for Spotify-iOS would start at $22 000 and respectively Android Spotify clone app would cost you $30 000 minimum.
5. Decide Whether to Buy a Franchise or Start from Scratch
The music industry is a multi-billion dollar industry in the world. It’s no longer a surprising fact that some people earn millions of dollars from the industry and they are not even artistes or singers. It’s worthwhile to note that the music industry generally has many facets that work hand in hand to make it successful, and this provides multiple opportunities for any career focused entrepreneur willing to leverage on this business.
Meanwhile if you decide to own a music streaming service business; it is advised that you buy into a franchise and leverage a well laid down and tested plan. Creating you own business is a great way to break into streaming too and it will gain you some real experience. It may feel like you’re at the bottom of a mountain, but it won’t be long until you find yourself half way to the top.
6. Know the Possible Threats and Challenges You Will Face
Have it in mind that there are minor factors you need to take into consideration when building an online streaming music business. We believe that the first one is the licensing your application is going to have, because it must be in accordance to Public Performance Rights. Note that different countries have various laws, but taking into the account the United States of America case – you have to comply with DMCA when building a music player app.
Secondly, one of the most important points your music app should have is ability to stream music quickly without any sound pausing or delays (if the connection allows). So, let’s say if your server is located in the USA, and your users partially are located in China or any other South-Asian region, then the connection will be less than average. So, if you consider conquering the whole-world’s market at once, several servers in different countries is a must.
7. Choose the Most Suitable Legal Entity (LLC, C Corp, S Corp)
Although the best legal entity for you to choose might differ according to your plans for your business; but for the sake of this article, the best legal entity to use in the United States is perhaps a Limited Liability Company (LLC). You can also consider starting a corporation; it all depends on your business vision and mission.
8. Choose a Catchy Business Name
- 721
- Crescent
- Platinum
- Neolite
- Winter
- Royal Theatre
- KMP
- Dark Sea
- Award Lane
- Exquisite
- Tiller
- Mixed Blood
- Otis
- Limkus
- Warrior
- Lion Multimedia Group
- Phantasm
- Source Interlink Co Inc.
9. Discuss with an Agent to Know the Best Insurance Policies for You
It is very important for you as a focused entrepreneur to stay insured at all times because of some unforeseen instances. Here below, are some of the insurance covers that an average music streaming Service Company should have;
- General insurance
- Business interruption insurance
- Cyber Insurance
- Computer Insurance
10. Protect your Intellectual Property With Trademark, Copyrights, Patents
You should be prepared to secure your intellectual property if you plan on venturing into the music streaming service business. Ideas and innovations tend to be stolen almost immediately they drop, but when they know that your music streaming service is protected by the law, they will be wary of getting themselves into trouble, which on its own is a benefit of having your intellectual property protection.
You should also make sure that the logo of your music streaming Service Company is well and totally secured and legally recognized as part of your company property. It is important that you trademark your company logo as well as get the copyright protection for your app and users.
11. Get the Necessary Professional Certification
You do not need a professional certification to start a music streaming Service Company. The industry is that plain and simple, which means that any body that has an interest in music can launch his or her music streaming Service Company without acquiring any special certificate.
As long as you have the passion and experience to start a music streaming service business, you can kick it off. But be warned that getting certifications in other fields like human resources development, business management might help your business integrity stand out.
12. Get the Necessary Legal Documents You Need to Operate
Note that the Music streaming services is a so-called ‘legitimate environment’. Licensed music services build a trustful relationship between your app and users. If you want to stream music, you may need Public Performance Rights. In the United States, it can be handled by one of these three agencies: The American Society of Composers, Authors and Publishers (ASCAP) or Broadcast Music Incorporated (BMI). To stream music in Europe, apply to the Society of European Stage Authors and Composers (SESAC).
These are some of the basic legal documents that you would need to successfully run a music streaming Service Company in the United States of America:
- Certificate of Incorporation
- Business License
- Business Plan
- Employment Agreement (offer letters)
- Operating Agreement
- Insurance Policy
- Contract Document
- Trademark registration for your logo
- Tax Payer’s ID number
13. Raise the Needed Startup Capital
There is no plain way to answer ‘how much does it cost to make an app like Spotify?’. As you may know, mobile app development is a lengthy and complex venture when putting into consideration the development team hired, hourly rate (or fixed price), business strategy, type of mobile app, features and app infrastructure, timeline, etc. Also most times, developer rate is a defining factor to app cost.
To make a music streaming app or any mobile app takes hundreds or thousands of hours. So, $25 per hour or $150 per hour rate for same app would make a fortune in between. For music app like Spotify, the biggest chunk of work would be backend (20%) and app development (40%).
When you want to raise funds, the first thing is to draft a detailed business plan for the business. When you have a good business plan, you can easily convince investors to invest in your business. There are several options when it comes to raising money to finance your music streaming service business. Some of the options are;
- Raising money from personal savings and sale of personal stocks
- Raising money from investors and business partners
- Applying for loan from bank
- applying for business grants and seed funding from donor organizations
- Sourcing for soft loans from family members and friends.
14. Choose a Suitable Location for your Business
If your Music Streaming Service Business needs a storefront, choose an attractive location in your city’s business district. We suggest you choose tasteful, conservative furnishings; hire friendly and engaging staff members who can attend to customers with respect and maturity.
15. Hire Employees for your Technical and Manpower Needs
Success is not a door you just walk into, success is a step you build through innovation and breakthroughs. Note that you can build your tech stack around Python and JavaScript, like Spotify team does. PHP is used to some extent on server side, though Spotify backend structure is mainly built with Java. Also, consider these tools that impact the cost to make an app like Spotify too:
- Kafka software: to take care and process data in real-time
- GraphWalker to take charge of model-based testing and integrate with Python services
- Amazon S3 (or similar) to store audio files, caching with CDNs
- Dataproc or other Google cloud platforms for platform infrastructure
- Chromium embedded framework (CEF) to build UI for desktop application
- Bootstrap and/or HTML5 for web app development
- Nginx as open source HTTP and proxy server
- Cost components of Spotify-like app
The architecture (backend) of an app like Spotify could immediately become quite entangled. This is because of the use of many supplementary services and Spotify apparently does include hundreds of them. A lot of them are written in Java and Python, others with Clojure and HTML5 languages.
We believe that Spotify team make use of C++ for Mac/Windows client, Java for Android and Objective-C for iOS applications, nothing new here. Also note that the key principle behind Spotify backend is partitioning by features. Each app feature has a team of developers assigned. Because to build an app like spotify you would also need to link the JS and backend with the so called ‘access point’.
Our issue of how much does it cost to make an app like Spotify is resolved here. Spotify Android SDK and Spotify iOS SDK are now available publicly. It aims to ease developers work a bit for features like music streaming and authentication. Services like Android Multimedia Framework can help integrate audio/media files.
The Service Delivery Process of the Business
Spotify now heavily invests in their mobile apps (Android and iOS), leaving some customers feeling bad with the quality of their desktop app. Being Omni channel present (desktop, web, mobile, Smart TV, PlayStation, Car Systems) and sustaining a great product quality is tough. Spotify has been used as a case study all through this article.
Spotify as a company stores the content on multiple servers, connected to their app blackened. When you request the song, the app should locate in on one of their services and direct it to your gadget. The song is then cached on your device and you can listen to it. But still the developers behind Spotify use a bit more advanced architecture:
- First the app checks your device’s cache to see if you have streamed this song before.
- If it’s already there, the app just retrieves it without sending a call to the servers.
- If it’s not there yet, they start extracting the particular track from the cache of the nearby Spotify users before calling the closest server.
This custom approach allows more seamless user experience, plus it reduces the load on servers. That means that the songs are delivered faster and less bandwidth is needed for processing the requests. Even though the price to develop a similar architecture is higher, it will save you a better.
16. Write a Marketing Plan Packed with ideas & Strategies
You need to understand that competition is fierce in this business. This is the reason why we strongly suggest maintaining an app user acquisition strategy in place prior to launch and to treat it as you would any traditional product launch.
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Website
Note that you need an online presence for your app. This is because people want to know your app is legal, and that you are truly invested in it as a business. When it comes to business brands, your app needs to be prominently featured across your site. It shouldn’t be an afterthought or a small logo on the footer. Instead, it should have a presence throughout, wherever it makes sense to.
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Social Media
Social media is pretty much a must for app promotion. There are two ways to connect with your audience via social – paid and organic. Below is a quick breakdown of both. The first which is organic promotion on social media comes in the simple form of having a presence; e.g. a Facebook page, and Twitter and Instagram profiles.
Create accounts and start following people within your target audience and industry. Don’t spam people by being overly promotional. Instead, try to connect with your audience in a meaningful way by posting about the things they care about and joining in on the conversation.
Note that adding a little bit of money behind your app promotion will boost your discoverability and get more people flocking to your app. Due to their broad audience and ability to segment, Facebook and Instagram are very effective advertisement platforms for mobile apps. And since Facebook owns Instagram, they make it incredibly easy to place app install ads on both.
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Public Relations
Nothing can be classified as bad press unless of course your press is non-existent. Media and influencer mentions go a long way in terms of creating buzz and credibility. There are many ways to go about this, but below are just a few to consider:
- Press release
- Host a launch party and invite the local media and tech industry
- Interviews with local newspapers and tech bloggers
- Guest blogging
App Store Optimization (ASO)
App Store optimization, or ASO, is the SEO of the mobile app world. It is imperative for discoverability in an oversaturated market. So how do you accomplish solid ASO?
- App name – Is it unique?
- Keywords -Include relevant keywords but be careful not to ‘keyword stuff’
- Description – Does your description clearly articulate your app’s value and is it frequently updated with app update descriptions and release notes?
- Screenshots/Video – Do you have 2-3 feature screenshots or a video tutorial outlining core app highlights?
- Ratings – Do you have positive app ratings?
Search Ads
Note that with the launch of iOS 10, Apple also introduced Search Ads, which is basically paid advertisement within the App Store. It means that you are able to bid for relevant keywords so that when a user is searching for apps using a particular term, your app appears first. Even though search ads are fairly new, early findings from AdWeek prove they are incredibly effective, with 50% of consumers clicking on the ads they see.
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Influencer/Celebrity endorsements
Do you have any connections in the tech world or within your respected industry that you can reach out to? Are there any location or industry-specific influencers you can connect with? Having them promote your app via their social channels and blog is a sure fire way to attract users to your app.
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Referrals/buzzworthy
Word of mouth is still worth its weight in gold. So if you build an app, it better be good. Competition is fierce, and app users have become spoiled by these world-class apps. That’s why before you invest in obtaining app users, you should invest in a mobile marketing platform that gives you the insights necessary to engage and retain your users or you’ll risk a high rate of user churn. In our world now, users expect a highly personalized experience which comes with apps, and if you want to keep users around, your mobile app marketing better be on point.
17. Develop Strategies to Boost Brand Awareness and Create a Corporate Identity
We all know that social media is the best way to communicate directly with fans, and it’s not going away anytime soon. There are tons of different platforms and apps out there, and it’s virtually impossible to keep up with all of them. It seems like “the kids” are into something new every day. Here are eight social media sites that can provide great exposure for your music streaming services business.
- Vine
- YouTube
- Snapchat
- Periscope