BurnLounge
Encyclopedia
BurnLounge, Inc. was founded in 2004, with offices in New York City
. Its primary business was the BurnLounge online music store
, and it was associated with Orbital Publishing, which produced printed matter for the company. Former CEO Alex Arnold (formerly with Excel Communications
and founder and former chairman of NuEWorld.com), was partners with Ryan Dadd and Stephen Murray.
Described by Gartner
G2 as a multi-level marketing
company, BurnLounge prefers the term "concentric retail" to describe its business model. The company provided record labels and artists with a fan-driven promotional channel.
The music service allowed customers to preview and purchase music, and chat through a proprietary client. Customers wishing to sell music through their own custom pages were required to purchase a subscription. Subscription costs varied, and consisted of either an annual fee or an annual fee with an additional monthly charge. These fees only allowed one to redeem sales points for BurnLounge products; participants paid additional fees if they wished to exchange earned sales points for money. A Fortune
article places the commission at five cents per 99-cent download.
The company stated that nearly 30,000 people had opened BurnLounge storefronts, including several major label musicians. The service provided content supplied by Muze, with early versions of its software provided by Beatport
and SocialIM. 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 offered only music downloads, but other products such as audiobooks, video, ring tones, and physical merchandise were said to be planned. Burnlounge 2.0 (or BL2) launched quietly on Friday, April 27, 2007.
The critics tended 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, while the supporters said that BurnLounge store owners were not paid for recruiting, but instead made money by selling a suite of products including music, VIP ticketing packages (through a partnership with Live Nation), a magazine subscription and more.
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
. Others named in the lawsuit include former 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. The case went before a Federal Judge in December of 2008, and while many of the accusations against the company were dropped by the FTC, as of January 2011 the court is yet to rule on the case.
As of October 2009, continuing through early 2011, the company's website hosts a teaser promoting BurnLounge 3.0 with the statement, "Get ready".
New York City
New York is the most populous city in the United States and the center of the New York Metropolitan Area, one of the most populous metropolitan areas in the world. New York exerts a significant impact upon global commerce, finance, media, art, fashion, research, technology, education, and...
. Its primary business was the BurnLounge online music store
Online music store
An online music store is an online business which sells audio files, usually music, on a per-song and/or subscription basis. It may be differentiated from music streaming services in that the music store offers the actual music file, while streaming services offer partial or full listening without...
, and it was associated with Orbital Publishing, which produced printed matter for the company. Former CEO Alex Arnold (formerly with Excel Communications
Excel Communications
Excel Communications was founded in 1988 by Dallas entrepreneur Kenny Troutt as a long distance reseller in the US telecom sector at the birth of telecom deregulation. It began selling franchises using a multi-level marketing business model, eventually selling over 200,000 of these franchises, or...
and founder and former chairman of NuEWorld.com), was partners with Ryan Dadd and Stephen Murray.
Described by Gartner
Gartner
Gartner, Inc. is an information technology research and advisory firm headquartered in Stamford, Connecticut, United States. It was known as GartnerGroup until 2001....
G2 as a multi-level marketing
Multi-level marketing
Multi-level marketing is a marketing strategy in which the sales force is compensated not only for sales they personally generate, but also for the sales of others they recruit, creating a downline of distributors and a hierarchy of multiple levels of compensation...
company, BurnLounge prefers the term "concentric retail" to describe its business model. The company provided record labels and artists with a fan-driven promotional channel.
The music service allowed customers to preview and purchase music, and chat through a proprietary client. Customers wishing to sell music through their own custom pages were required to purchase a subscription. Subscription costs varied, and consisted of either an annual fee or an annual fee with an additional monthly charge. These fees only allowed one to redeem sales points for BurnLounge products; participants paid additional fees if they wished to exchange earned sales points for money. A Fortune
Fortune (magazine)
Fortune is a global business magazine published by Time Inc. Founded by Henry Luce in 1930, the publishing business, consisting of Time, Life, Fortune, and Sports Illustrated, grew to become Time Warner. In turn, AOL grew as it acquired Time Warner in 2000 when Time Warner was the world's largest...
article places the commission at five cents per 99-cent download.
The company stated that nearly 30,000 people had opened BurnLounge storefronts, including several major label musicians. The service provided content supplied by Muze, with early versions of its software provided by Beatport
Beatport
Beatport is an online music store specializing in electronic dance music and culture. Beatport is a privately held company owned and operated by Beatport LLC and based in Denver, Colorado.-History:...
and SocialIM. 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 offered only music downloads, but other products such as audiobooks, video, ring tones, and physical merchandise were said to be planned. Burnlounge 2.0 (or BL2) launched quietly on Friday, April 27, 2007.
Controversy
BurnLounge was not without controversy. People who understood how BurnLounge worked generally fell into one of two categories: Fans and supporters of the concept; or critics of the multi-level marketing aspect of the business.The critics tended 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, while the supporters said that BurnLounge store owners were not paid for recruiting, but instead made money by selling a suite of products including music, VIP ticketing packages (through a partnership with Live Nation), a magazine subscription and more.
FTC files pyramid scheme lawsuit
On June 10, 2007, it was reported that the Federal Trade CommissionFederal Trade Commission
The Federal Trade Commission is an independent agency of the United States government, established in 1914 by the Federal Trade Commission Act...
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
University of South Carolina
The University of South Carolina is a public, co-educational research university located in Columbia, South Carolina, United States, with 7 surrounding satellite campuses. Its historic campus covers over in downtown Columbia not far from the South Carolina State House...
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
South Carolina
South Carolina is a state in the Deep South of the United States that borders Georgia to the south, North Carolina to the north, and the Atlantic Ocean to the east. Originally part of the Province of Carolina, the Province of South Carolina was one of the 13 colonies that declared independence...
. Others named in the lawsuit include former 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. The case went before a Federal Judge in December of 2008, and while many of the accusations against the company were dropped by the FTC, as of January 2011 the court is yet to rule on the case.
Out of Business
In August 2007, Burnlounge laid off the vast majority of its New York employees. As of November 2007, the company is no longer operating pending the FTC litigation.As of October 2009, continuing through early 2011, the company's website hosts a teaser promoting BurnLounge 3.0 with the statement, "Get ready".