BurnLounge

BurnLounge, Inc. was an allegedly illegal pyramid scheme [cite news
url = http://www.thestate.com/188/story/86861.html
title = Pyramid scheme suit names ex-USC star
publisher = The State
date = 2007-06-09
accessdate = 2007-06-10] founded in 2004, with offices in New York City. Its primary business is the BurnLounge online music store, and it is associated with Orbital Publishing, which produces printed matter for the company. [cite web
title=General information name search
work=Division of Corporations
publisher=State of Delaware
url=https://sos-res.state.de.us/tin/GINameSearch.jsp
accessdate=2006-07-13] [cite web
title=Contact information
publisher=BurnLounge
url=http://www.burnlounge.com
accessdate=2006-07-13] [cite web
title=Contact information
publisher=Orbital Publishing
url=http://www.orbitalpublishing.com/Contact.html
accessdate=2006-07-13] CEO Alex Arnold (formerly with Excel Communications and founder and former chairman of NuEWorld.com [cite press release
url=http://www.sec.gov/litigation/litreleases/lr17171.htm
title=SEC Files Lawsuit against E-commerce Network Marketing Company
date=2001-10-04
publisher=United States Securities and Exchange Commission
accessdate=2006-07-10] [cite news
url=http://www.kauaiworld.com/articles/2000/05/28/export3511.txt
title=Nueworld.com, more than a Web site, has its Kaua'i launch
work=The Garden Island
publisher=Kauai Publishing Company
date=2000-05-27
accessdate=2006-07-10] ), is partners with Ryan Dadd and Stephen Murray.

Described by Gartner G2 as a multi-level marketing company, [cite news
url=http://www.billboard.biz/bb/biz/archivesearch/article_display.jsp?vnu_content_id=1001014011
title=With BurnLounge, Everyone Is A Retailer
author=Bruno, Antony
date=2005-08-20
work=Billboard
publisher=VNU
accessdate=2006-07-10 "( [http://www.phasequest.com/BurnLounge/billboard_burnlounge_article.pdf PDF reprint] )"] BurnLounge prefers the term "concentric retail" to describe its scheme. [cite news
date=2006-02-01
title=MYSPACE+ITUNES=AMWAY. Is BurnLounge a pyramid scheme?
author-Meza, Hector
work=New York Press
url=http://www.nypress.com/19/5/listings/music.cfm
accessdate=2006-07-10] The company claims that it provides record labels and artists with a fan-driven promotional channel. The advertisement videos on each BurnLounge store, however, promote recruitment rather than music.

The music service allows customers to preview and purchase music, and chat through a proprietary client. Customers wishing to sell music through their own custom pages are required to purchase a subscription. Subscription costs vary, and consist of either an annual fee or an annual fee with an additional monthly charge. These fees only allow one to redeem sales points for BurnLounge products; participants must pay additional fees if they wish to exchange earned sales points for money. [cite web
title="Sell music" package descriptions
publisher=BurnLounge
url=http://www.burnlounge.com
accessdate=2006-08-17] The amount of compensation for resellers is not disclosed beforehand to interested parties, one must first register to obtain these details. [Information as listed on BurnLounge storefront sites as of 2006-07-13.] A "Fortune" article places the commission at five cents per 99-cent download. [cite news
url=http://money.cnn.com/magazines/fortune/fortune_archive/2006/04/03/8373063/index.htm
title=Money to Burn?
work=Fortune
author=Tucker, Reed
date=2006-03-30
accessdate=2006-07-10]

The company states that nearly 30,000 people have opened BurnLounge storefronts, including several major label musicians. [cite press release
url=http://www.prnewswire.com/news/index_mail.shtml?ACCT=104&STORY=/www/story/06-09-2006/0004377668&EDATE=
title=BurnLounge Launches BurnLounge 1.0 - Creating a Powerful Digital Marketplace
publisher=BurnLounge
date=2006-06-09
accessdate=2006-08-17] The service provides content supplied by [http://www.muze.com/ Muze] , with software provided by Beatport and SocialIM. [cite news
url=http://www.informationweek.com/industries/showArticle.jhtml?articleID=189602557
work=InformationWeek
title= SocialIM Launches Instant Messaging App For Online Communities
date=2006-06-28
accessdate=2006-07-11
author=Gonsalves, Antone
publisher=CMP Media] Version 0.9 of the software was introduced in October 2005, and version 1.0 was unveiled in Las Vegas on June 9 and 10, 2006. BurnLounge currently offers only music downloads, but other products such as audiobooks, video, ring tones, and physical merchandise are said to be planned. Burnlounge 2.0 (or BL2) launched quietly on Friday, April 27th, 2007.

Controversy

BurnLounge is not without controversy. People who understand how BurnLounge works generally fall into one of two categories: fans and supporters of the concept; or critics of the multi-level marketing aspect of the business:

The critics tend to focus on BurnLounge's marketing materials stressing the importance of building the network of friends and users over the actual selling of the product, a common theme in pyramid schemes [cite news
url=http://digitalmusic.weblogsinc.com/2006/07/19/burnlounge-still-ripping-consumers-off
title=BurnLounge - Still Ripping Off Consumers?
author=Finlayson, Gordon
date=2006-07-19
accessdate=2006-07-21] [cite news
url=http://blogs.ittoolbox.com/emergingtech/edge/archives/burnlounge-is-doomed-to-failure-13928
title=BurnLounge is Doomed to Failure
author="Puramu"
date=2007-01-15
accessdate=2007-06-03] , while the supporters say that BurnLounge store owners can make money through non-recruitment sales on their individual storefronts.

FTC files pyramid scheme lawsuit

On June 10, 2007, it was reported that the Federal Trade Commission filed a lawsuit on June 5, 2007 against specific BurnLounge participants and their involvement with BurnLounge's alleged pyramid scheme. One person named in the lawsuit is former University of South Carolina football star Rob DeBoer, who says that he recruited about 45 other people to open their own BurnLounge sites. Those recruited would then pay a commission on their sales to DeBoer. DeBoer stated that he made almost US$300,000 from BurnLounge. The lawsuit is the result of a year-long investigation into BurnLounge by the state of South Carolina. [cite news
url = http://www.thestate.com/188/story/86861.html
title = Pyramid scheme suit names ex-USC star
publisher = The State
date = 2007-06-09
accessdate = 2007-06-10] Others named in the lawsuit include BurnLounge CEO Alex Arnold, and two Texas men who promoted BurnLounge similarly to DeBoer. The FTC's claim is that BurnLounge is a pyramid scheme because the company pays more money for recruiting new store owners than for selling music. According to the lawsuit, BurnLounge operators earned bonuses of up to US$50 for recruiting two new members and selling two albums per month, but only pays US$0.50 per album sold.Fact|date=June 2007

As a result of the FTC investigation Alex Arnold is no longer CEO.

Out of Business

In August 2007, Burnlounge laid off the vast majority of its New York employees.Fact|date=November 2007 As of November 2007, the company is no longer operating pending the FTC litigation.Fact|date=November 2007

References

External links

* [http://www.burnlounge.com/ BurnLounge]

* [http://www.palmettoscoop.com/2007/06/13/official-burnlounge-ftc-complaint-online/ Burnlounge Lawsuit]