FTC weighs in against BurnLounge

According to a news report, the U.S. Federal Trade Commission has filed suit against online music promotion company BurnLounge, calling it a "pyramid scheme."

Matt Rosoff
Matt Rosoff is an analyst with Directions on Microsoft, where he covers Microsoft's consumer products and corporate news. He's written about the technology industry since 1995, and reviewed the first Rio MP3 player for CNET.com in 1998. He is a member of the CNET Blog Network. Disclosure. You can follow Matt on Twitter @mattrosoff.
Matt Rosoff
3 min read

Beginning musicians tend to be big dreamers. And there are an awful lot of us--Guitar Center's got nearly 200 stores now taking in more than $450 million per quarter, and you know that most of those buyers are thinking, at least in the back of their mind, that they'll be the next Jimmy Page. Or Joe Strummer. Or Kurt Cobain.

As you might expect, this combination tends to draw a lot of, shall we say, questionable businesspeople to the music industry, particularly the lower reaches. Over the years, I've heard it all: unscrupulous managers, publicists and promoters who take up-front payments and deliver nothing in return, small labels that collapse without a trace, big labels that ensnare artists into perpetual servitude, promoters and clubs forcing bands to pay up front for the "privilege" of playing (hint: if all the bands are paying to play, most of the people in the audience are probably going to be other bands), charging artists an up-front fee to appear on a CD compilation that will be mailed to radio programmers (who will throw it in the trash can, as they do with most unsolicited discs, especially pay-for-placement compilations), and on and on and on.

Most of these pitches aren't illegal, but all of them take advantage of the gullibility--or optimism, if you will--of musicians. Common phrases include "you've got to believe in yourself" and the time-tested "you have to spend money to make money."

A couple weeks ago, a fellow musician asked me if I'd ever heard of a company called BurnLounge. He called it a mixture of MySpace and iTunes. I looked into it, and at first glance it looked like an interesting new wrinkle on online distribution. Essentially, any music fan can become an online music store, selling tracks from artists he or she likes. The stores are fairly easy to set up--it's basically a Web module that can be placed on any home page. The resellers get some cut--money or other forms of reward--for each song they sell. Artists, meanwhile, can sell their music through hundreds or thousands of online stores simultaneously.

Then I did a little more digging, and began to see some pretty skepticalblog postings about the company. Apparently, while it's possible to set up a BurnLounge store for free, there are also higher-level stores that require up-front fees. (I haven't found a price list on the BurnLounge Web site, but I've seen blogs reporting that the fees range from about $30 to more than $400.) More important, once you've signed up to become one of these higher-level affiliates, you earn money by convincing other people to become affiliates.

Aha! A multi-level marketing program. That explains why my fellow musician had first heard of BurnLounge from a random guy in a mall.

Now, there's nothing illegal about MLM in itself, but years of watching the music industry (not to mention surviving the Web 1.0 bubble) have trained me to be suspicious of up-front costs and uncertain business models. I shared my suspicion, pointed the inquirer to some of those blog postings, and decided that I'd continue to promote any of my own musical projects through other channels.

Yesterday, according to a news report, the U.S. Federal Trade Commission filed a lawsuit in California accusing BurnLounge of being an illegal pyramid scheme.

Now, an accusation doesn't make it a fact. Nonetheless, I'm more than happy to stick with time-tested sales and promotional channels like CD Baby and MySpace.

All a good reminder to beginning musicians: there's no short cut to success--not even the power of the Web can substitute for the time-tested combination of talent, hard work, and luck.