Spotify is the world's most popular online music streaming service with 320 million active users including 150 million paid subscribers. Next, we will tell you how this service works, why it has become so popular and how to create your own music clone based on it - an application with similar functionality and similar design.

Spotify Business Model

Spotify is a music streaming service that doesn't require buying and downloading songs to listen to them legally: the user simply selects a song and plays it, similar to watching a YouTube video. You can listen to music on your smartphone, tablet or computer.

At the same time, every time a user listens to a music track, the copyright owner receives royalties, on which Spotify spends about 70% of its income. The royalty amount per track playback varies from 0.006 to 0.0084 (depending on the country, the number of paid subscribers and artist plays, the number of tracks played by a particular author to the number of track playbacks in general on the service for a certain period and many other factors).

The site earns money through Premium subscriptions, advertising integrations and various tools that help artists promote their music and merchandise within the service: setting up an artist profile, obtaining a "Confirmed" status, access to support, branded playlists, etc.

A complete list of services and terms of cooperation available for artists and labels can be found on the Spotify for Artists, the cost and description of paid subscriptions for users  - on the platform's main website.

Target audience of your application

When Spotify launched their service, they targeted two audiences:

• Regular users from the European Union and North America who want to listen to their favorite music in the simplest and most convenient way.
• The so-called forced "pirates" - people who listen to music illegally, because they cannot buy it due to the inaccessibility of such an opportunity and / or because of the high cost of albums, tracks.

In 2008, it was a winning strategy, as Spotify had almost no serious competitors back then, so you could simply create a quality music streaming service and use ads to show it to as many potential users as possible.

Now the situation is different: the new music streaming service needs to compete with Spotify, Apple Music, Google Play Music, Amazon Music, Yandex Music Deezer, Soundcloud and many other major platforms. It's difficult, expensive and risky, so when building your Spotify clone, it's best to target a specific target audience in order to stand out from the competitors with a more complete playlist in your chosen niche, as well as more personalized design and marketing.

The most obvious option is to simply choose a musical direction: rock, rap, folk, classical, club music, the 30s of the last century, etc. Another option is to work only with artists from a specific country or region. You can also create a Spotify clone with tracks from young artists or new bands and artists.

A more complicated option is to create a Spotify analog that will help artists raise money to record albums, promote their personal brand and organize tours; or send part of the earned to various charitable purposes at the choice of users or artists.

Choose one of the listed niches or pursue your own unique startup idea, and you'll have a much better chance of success than if you just created another direct competitor to Spotify.

Licensing and payments to performers

To create your app like Spotify, you must not only come up with a unique competitive idea that sets you apart from the competition, but also ensure its legal status. That is, obtain the appropriate licenses from the copyright owners to publicly reproduce their tracks on your service in exchange for paying royalties for each such reproduction.

In the case of the United States, it’s usually about two main types of licensing:

• Musical Composition License Agreement. In this category, there are two types of licenses you need to create a Spotify clone: performance rights and royalties for mechanical use. The former are licensed from the American Society of Composers, Authors and Publishers (ASCAP) or Broadcast Music Inc (BMI). The latter are licensed through Royalty Board Copyright (CRB).
• Sound Recording License Agreement. In terms of rights to actual recordings, Spotify has signed contracts with three of the largest labels in the world: Sony Music Entertainment Group, Universal Music Group and Warner Music Group. In addition, the platform also signed an agreement with the independent Merlin network for digital recordings of independent labels.

There are other types of licenses and sub-licenses that vary by country and region. Be sure to get them so that later you do not pay huge fines for pirated music reproduction - from 700 to 150,000 dollars for each illegal reproduction of a song.

Spotify clone app features

The next step in developing a Spotify clone is to decide which features to implement in your project in the first place and what exactly they should be. Apart from being able to stream music itself, the most common core functionality includes:

1. The procedure is standard, except that during registration (and further from time to time), your service must check the location of users in order to block access to the service for those who do not fall under the jurisdiction of the licenses you received.
2. Track search system. Allows using keywords and filters to search for songs by title, artist, album, genre, studio and other parameters. The simpler this function, the better.
3. Personal libraries. When a user likes a song, he can add it to his library so then he can quickly find and play it later. Libraries can save songs, albums, artists, playlists.
4. Integration with social networks. Allows users to share their positive experiences on Facebook, Twitter and Instagram. In particular, they can share their favorite track, album or playlist, as well as brag about how many people have subscribed to the playlists they have created.
5. Playlists of compositions. Users should be able to combine their selected songs into playlists and indicate their name, add a cover and a short description. It should also be possible to make playlists public so that other users can see them.
6. Offline mode. The ability to download selected tracks to a smartphone or computer to listen to them without an Internet connection. On Spotify, this feature is only available to Premium members.
7. Recommendations. The system analyzes the user's preferences (music genre, favorites list, favorite artists, frequent repetitions, dislikes), selects similar compositions and offers them to the user. Now the neural networks are used for this.
8. Notifications. Push notifications, emails or messages in instant messengers and social networks will inform customers about the release of a new album of their favorite artist, new recommended tracks, actions of friends or service updates.

Monetizing music streaming

Spotify's main source of revenue is paid subscriptions, which generate 90% of all revenue for the company. For example, in the first quarter of 2020, Premium subscribers brought the service about $ 1.8 billion in revenue, while the rest of the directions accounted for less than $ 200 million.

There are four types of paid Spotify subscriptions in US:

• Individual - $ 10 / month. Allows one user to listen to music, switch tracks at will and download them to phone.
• Duo - $ 13 / month. Allows two users to listen to ad-free music, switch tracks at will, download them to phone, and get recommendations that both subscribers might like.
• Family - $ 15 / month. Connects the same possibilities as Duo, but for six users of the same family. With this, parents will have the function of blocking obscene music in the children's app (Spotify Kids).
• Student - $ 5 / month. Connects to the Hulu plan (with ads): gives access to SHOWTIME streaming service, offline mode and free track switching at will.

In addition to subscriptions, Spotify makes money through various ad integrations, which generated $ 170 million in revenue in the first quarter of 2020. Such integrations are usually of three types:

• Audio ads. Inserts of audio ads in between tracks that cannot be skipped. Take 15 to 40 seconds. There is a possibility of targeting by music preferences and location.
• Video ads. Works exactly the same as audio ads, but only on mobile devices. Usually appears after 30 minutes of listening.
• Images that appear at the bottom or center of an app screen after certain user actions, such as returning to the app or changing screens.

For labels and artists, Spotify offers:

• Authenticity of the artist.
• Access to the Spotify for Artists, with which you can customize your artist profile, specify (or edit) a biography, quickly add tracks (albums), see where are you listened most (helps with organizing tours).
• Promotion of concerts, tours, TV shows and other events both among your subscribers and among other users of the service.
• Selling merchandise directly to subscribers.

Spotify clone cost

The cost of developing an application like Spotify depends on several factors: the complexity of the application (MVP, full functionality), the location of the developer company, the hourly rate of the developers, etc. So, if you want to create a Spotify clone with minimal functionality, then it will cost from 20,000 thousand dollars, while a full copy will require more than 125 thousand dollars.

Here are the rough numbers that show the average cost of developing a Spotify clone with full functionality:

Spotify Clone App — How to Create a Music App like Spotify? key takeaways:

#1. Spotify Business Model
#2. Target audience of your application
#3. Licensing and payments to performers
#4. Spotify clone app features
#5. Monetizing music streaming
#6. Spotify clone cost