BurnLounge Gets Burned, and I’m Relieved
BurnLounge is basically the Amway of digital music. Its customers run digital music stores and make money in one of two ways: 1) selling music downloads, and 2) recruiting other people to become store owners.
This kind of business model resembles a pyramid scheme, since it’s virtually impossible to make back the annual $29.95 to $429.95 fee you pay for a store by selling music downloads alone. (You only earn something like $0.05 per download, requiring 1000s of sales) The FTC seems to agree, and recently asked the Central District of California court to shut it down.
I can’t tell you how relieved I am that I turned down a BurnLounge job offer last year. The pay was good, the job involved digital music, the company was a profitable startup…but something wasn’t quite "right". As with Amway, a vast majority of their revenue came from recruitment; digital music was just the hook.
The company founders actually seemed like cool guys. I believe they had no melicious intent. But still, when you make promises of wealth to consumers ("Own your own store!") which consistently fail to deliver, there’s a little sketchiness going on. Hopefully they’ll find a new model to follow.
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