This Spotify-challenger app works like a stock market

Music-streaming app works like a stock market
Music-streaming app works like a stock market   

In a dark basement of a private members club in London, two bands are setting up for a gig. Both are there after being discovered on a start-up streaming app.

The platform, called Tradiio, works like a stock market where users can invest virtual currencies in upcoming artists that they like. The musicians are ranked on a table, and if they move up the rankings, investors can take profits and use that money to buy real goods such as festival tickets.

British artist Mitch Stevens - aka Cholombian - uploaded his music to Tradiio in the hope of being discovered.

"I've had a lot more interest from people that I wouldn't have normally reached, which in itself is probably a bit more valuable than any record label could ever hand you," Stevens, who is one of the top artists being invested in on Tradiio, told CNBC.

Streaming controversy

Streaming services are certainly hot right now and have shaken up the music industry's once successful business models. Paid downloads of songs declined by 12 percent in 2014, to 1.1 billion from the year before, according to Nielsen SoundScan.

In contrast, the streaming of music surged 54 percent to 164 billion in 2014. (Tweet this)

But many of the larger platforms have come under criticism from smaller artists as well as global popstars.

Tradiio: Carving its own niche
Tradiio: Carving its own niche   

Indepenedent record labels clashed with video streaming website YouTube last year over what they saw as unfavourable contract terms around advertising.

"Shake It Off" singer Taylor Swift took her music off music streaming platform Spotify last year, claiming that the service does not compensate artists properly. Indie artists have also complained that the streaming service – which has an $8 billion valuation – does not favor smaller musicians.

Tradiio

Tradiio – which was launched in Portugal in 2013 - is hoping to appeal to those smaller artists and become an alternative to the main players.

"Spotify works great for really established artists. But Tradiio is a much better place to discover new music," Paul Benney, managing director of Tradiio, told CNBC in an interview.

"What Tradiio is doing is instead of making micro payments to new artists for streaming, we are offering artists opportunities to progress their careers and make a living from being a musician."

Challenges

The most popular artists are offered prizes, including a studio session paid for by Tradiio or a slot at London's Field Day music festival – which Stevens (or Cholombian) is now down to play.

Benney said he is also hoping to start his own music label, as well as build links with major record companies in order to use the platform to get unsigned artists into the spotlight.

But the app faces an uphill battle in what is a competitive music streaming market and analysts said that standing out from the competition was the key to success.

"For any start-up it's going to be a big challenge just to acquire users," Jack Kent, senior mobile analyst at IHS, told CNBC in an interview.

"One way to do that is to provide a differentiated experience. So a lot of the apps just provide a standard $9.99-a-month all-you-can-eat music subscription service. But if you can do something different, then there might be ways to acquire a different type of user."