How much money do you realistically see this generating? With how much effort for marketing and polishing? I would be impressed if OP could calculate even 1 dollar per hour and come out with a profit.

This is a niche of a niche of a niche.

There are already several projects that do this. Sub/Mad/Airsonic all allow hosting your own music and transcoding with ffmpeg.

There are numerous sites giving tutorials about how to set up such systems using OSS.