There's a quiet controversy brewing in the digital music industry over the business strategy of recently launched online music store BurnLounge with critics alleging that the store is the digital music world's equivalent of a pyramid selling scheme. The site advertises itself as 'the world's first community based digital download service' (guess they never heard of Napster) and allows users to get personally involved on a number of levels as music retailers.
At the most basic level users are encouraged to register and build their own personal Web shop, containing their own personal music picks and recommendations. The user then can recommend their personalized music store to friends and family and get reward points every time one of those people buys from their store. So far it's pretty innocuous - sounds a bit like iTunes meets Amway.
But at the next level things start to get more complicated - the BurnLounge Affiliate and Music Mogul Programs also allow users to sign up and build their own stores, but users at this level can also sign up affiliate retailers - and every time they do that they will get a share of any revenue generated from sales on their affiliate's stores and a share of the fees that their affiliates pay.
If a retailer does manage to sign up a lot of affiliates, it does seem that they have a good potential to make cash from the scheme, but probably not from actual sales of music themselves, rather from the costly sign-up fees involved. While the basic package starts at a modest $29.95 per year, if you take a VIP package with the works and join the Music Mogul Program that's going to set you back a whopping $605.35 per annum.
Given that the BurnLounge stores price music at a level pretty comparable to iTunes or other major download stores and offer no substantial additional functionality it seems that there is little in the way of a value proposition for a consumer over other download services. While it's difficult to see how much revenue a retailer on the service will get, I get the feeling that most of the real revenue from this scheme is going to come from the schmucks that sign up to sell music, not from the music sales themselves.
21. 18. 1. This may be true, but burnlounge pays a higher royalty rate to artists than anyone else quotes. On the surface this looks fantastic, but if Apple isn't making _that_ much money on iTunes, how does brunlounge plan to support itself as time goes on? All the things you mention cost money, (back office systems, IT staff, CC processing). And the many faceted forward looking store concept would incur much higher IT costs than iTMS does.
[You are broaching two completely different topics. Overhead cost that BurnLounge might accrue is different from artists recieving a higher royalty rate from BurnLounge versus another company. So which topic are you discussing?]
2. The indie artists that I pointed out promote themselves. iTunes promotion is great, but you can't bank on getting a free piece of the screen real estate in itms to make your band a success.
[Take it from me, I have worked in the music business for over 10 years doing internet marketing and promotions for major and indie label artists. You say indie artists promote themselves... what the heck do you think BurnLounge is and is doing? If you know about marketing, you would know that having face time on the front page of a store next to major label selling artists is a great opportunity. Not only is their music easy to find in a huge database of music, but many artists will see "run off" sales. That is basically sales they get when someone goes to the site intending to buy a specific song and sees them on the front page -- they click on the icon to see what they are about and listen to the song and might happen to like it and decide to buy it. How many times have any of us gone to Amazon or any other site to buy something and see something they are featuring or a "customers who bought this have also bought this" section and found some other cool things to buy. I've done it, alot of people find things that way on the internet. So to say that having face time on a storefront does nothing is someone who does not know internet marketing.
3. Why not just one Burnlounge store with everything? Because Burnlounge is using you to do their marketing job, and then asking you to pay them for the priviledge. It's a great deal for them, but not such a hot deal for you. I'm all for helping the indie artist, and promoting a fair and equitable playing field, I just think Gord has it right on the money when he calls this a pyramid scheme.
[Again this statement shows me that you do not know the first thing about marketing. And I'm not trying to be rude, but your statement sounds a little "green". You are talking about one store with everything, like iTunes... like Amazon... like Overstock... etc etc. That's great and all, but BurnLounge is a completely different marketing model than those stores. There are so many reasons why, but I'll try to point out a few big ones:
- BurnLounge will eventually have the largest music database in the world. Everything from local, eclectic, out of print, you name it. Just like many young people have myspace profiles, it will soon be common for any artist to upload their music on BurnLounge. You are talking about tens of thousands of artists all over the world, and millions upon millions of songs. So does it make sense to only feature 30 artists on the front of one website? By having different BurnLounge stores featuring music that their store owners dig, the store owners are helping to do some of the "dirty" work for you ie. as in finding all this amazing music that MTV or radio stations don't play. Owners have the opportunity to appeal to each kind of consumer. I would rather find a BurnLounge store that features old 80's punk rock where the owner has kick a$$ play lists and features songs that maybe I don't know about then try to go to a one-size-fits-all online store and try to search the database and sift through millions of songs looking for something I might like. BurnLounge is peer-to-peer... How many times have you found music through a friend's suggestion? It's the same thing with BurnLoungers. We are the digital version of the corner record shop. Locals artists now have so many open channels to work with many BurnLoungers to feature their music. And all BurnLoungers are pushing their stores in different way... have different customers... what this means for independent artists is that they have an instant distribution channel and now... they aren't the only ones pushing their music to be sold... if they are working with a few BurnLoungers, they will have a network of store owners pushing their music. How do you not see the beauty of this?
- Another reason, not one store is because that is still limited the distribution channel. BurnLounge is CHANGING the entire distribution channel for music and entertainment. Before, companies held the key to distribution... now we do. Anyone can get involved. This is one of the most amazing things to hit the music and entertainment industries... the distribution channel just went from a narrow tunnel, to exploding wide open.
And let's stop talk of pyramid, because that just makes you look foolish. Go visit some other message boards to see how quickly that notion has been dismissed, even by the people that have proclaimed that. I'm really sure that Nascar and Rick Dees is involved in a Pyramid scheme. BurnLounge is nothing like a pyramid scheme. NOTHING like it. I'm sure that Tony Orlando from our parents/grandparents generation is going to taint his name by being a very large investor with BurnLounge. I could copy and past my past responses to pyramid schemes but there's no point. You will simply find something else to complain about.
And by the way, BurnLounge isn't making us pay for the priviledge of selling music... you are buying into what is essentially a franchise. You are paying for your store maintainence and all the office tools and marketing tools. Tell me where that comes free again? Does it come free somewhere else??? Because if someone is going to make me a website, maintain the monthly costs of keeping it on the internet, convert thousands of songs a month into a digital format and upload it onto my website, take care of all the credit card transactions, give me marketing materials to promote my site, find me 10 of the latest and greatest new songs and give them to me to listen to, send me a music magazine and DVDs of the latest info and artist performances for free, well then to HECK WITH BURNLOUNGE, why am I shelling out $12.95 a month??? Because apparently, you are telling me I can do this all on my own for free!!!]
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And why do you all expect to be making money instantly??? It's a brand new business!!! It takes time to build up a customer base... don't get involved in business if you don't know how business works!!! Let's keep in touch, I have a feeling in 2-3 years when BL has been open to the world for a little while, you will understand what it is that you can't see now.
Posted at 5:33PM on Jun 23rd 2006 by LT