South Africa’s start-up NicheStreem sees an opportunity for niche or vertical markets apps as an alternative to popular music streaming services such as iTunes, Spotify, Deezer, Simfy Africa, Tidal and YouTube. By Gugu Lourie
While mass market music streaming apps offer near identical catalogs with similar features at the same price point and compete for the same user, NicheStreem, a Cape Town-based start-up founded by Catherine Lückhoff, is trying to change that.
The start-up believes it’s time to improve the one-size fits-all music streaming model and capitalise on the burgeoning emerging markets where giants of the streaming music business fear to tread.
“When we started NicheStreem, we asked the questions: How do you bring more users into the fold and how do you make a music streaming service profitable?”
“The answer,” she said was to “build low cost, custom music streams for vertical markets”.
The company has since built a scalable music streaming platform that can support multiple streams each branded, curated and promoted to a target audience.
It has already launched a successful first Afrikaans music streaming service know as Liedjie.com, the first stream in the NicheStreem stable, which has been live for three months.
Liedjie.com is the first niche music streaming in Africa.
Lückhoff says Liedjie.com offers Afrikaans music fans a home for the music they love and has more than 10 000 tracks, 600+ playlists for every genre, mood, occasion and activity.
Asked why the focus only on Afrikaans speaking music lovers, she responded: “Afrikaans music offered an ideal niche on which to base our proof of concept. It is a market the team has extensive experience with and whom we know are loyal supporters of the music and the culture.”
As a competitive edge, NicheStreem streams offer niche specific catalogues, localised play-listing and retail for a third of the price ($3 vs $9.99).
“Our target audiences are die-hard fans of specific genres/niches, e.g. Afrikaans music or Persian music, or Christian music, and as a result our marketing tactics are more focused and effective,” explains Lückhoff.
It also offers users an offline listening feature, localised and the start-up claims to be sensitive to cultural nuances.
NicheStreem’s music streaming platform is powered by world class technology.
To be able to provide the best experience and meet demand, NicheStreem uses Amazon Elastic Compute Cloud instances for application servers.
Amazon Web Services (AWS) allows the firm as a start-up to maintain a highly responsive system and to be more strategic.
“We were able to go from a system architecture design to an online and working production system in a very short space of time, i.e. 6 months,” says Lückhoff.
“With the combined security from AWS and our platform we were able to pass technical due diligence rounds conducted by the global major music labels first time round. The low cost and simplicity of its services meant we could build a world class, scalable business.”
As an added value, NicheStreem promises competitive payouts to market specific artists.
NicheStreem is opening its Seed Round next week to raise capital to fund its expansion. Lückhoff explains, “We are looking to raise a minimum of $500k (R7.8 million)”.
Targets Nigeria market as a growth opportunity
NicheStreem – which has seven employees and a number of supporting companies such as PeachPayments, MediaNet from Seattle and AWS (both locally and abroad) – has plans to expand its music streaming services to Nigeria, Africa’s biggest economy.
“Funding dependent, the aim is to launch a second stream – most likely a faith based stream – by the second quarter in 2017,” Lückhoff told Techfinancials.
NicheStreem generates revenue through monthly subscriptions and Business-to-Business revenue for bundle deals and/or advertising.
The start-up is not yet profitable and hopes to recoup its initial outlay costs in about a year.
When asked how she is planning to build a global business while based in Cape Town, she said, “The same way we would from London or Tel Aviv or New York, except in Cape Town it’s cheaper to hire office space, recruit talent and access infrastructure and services.
“We raised an angel round of $250k (R3.9 million) in just five days in January 2015 and we have spent a little over $320k (R5 million) building the entire service. Tell anyone from the UK or US that and they will have a hard time believing you it’s possible.”
NicheStreem is a finalist in the upcoming FNB Innovation Awards, sponsored by Endeavour and last year GreatSoft was chosen as the winner of the competition. GreatSoft CEO Bruce Morgan became a member of the Endeavour Entrepreneurs.
The list of South African Endeavor Entrepreneurs includes Adrian Gore of Discovery, Vinny Lingham – who sold his virtual gift card service, Gyft, for $52 million – and Taste Holdings’ Carlo Gonzaga.
If NicheStreem wins the competition, Lückhoff says it will “Apart from the boost in team morale, we are well aware that the award would go a long way in building awareness and credibility for the business? For a start-up like ours who aims to raise a war chest to help us scale and beat out the competition, it will be invaluable PR.”