BurnLounge.com Launches Viral Marketing Effort in New York City

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I was invited by a friend to New York City’s Coffee Shop Lounge, where about 150 “b” and “c-level” independent music industry executives, djs, artists, performers, songwriters and ancillary music hanger-ons from all walks of the industry gathered to listen to a pitch from New York’s most recent “Music 2.0″ (an acronym describing the post-crash Internet music economy) start-up, BurnLounge.com.

The company launched a multi-level, viral marketing campaign to have designated sponsors (otherwise known as “music moguls” according to their literature) sign-up partner’s interested in hosting a downloadable music store on their own web sites using BurnLounge.com’s music download store package.

A flashy, slickly produced, techno-laden infomercial was shown mid-way through the get together on the bar’s flat-panel tv’s, giving the crowd a generic look at how one can get involved in “making money” (as one of the principals emphasized in a follow-up speech) by selling music downloads as a registered partner in BurnLounge’s affiliate program. From the video, I learned about the three distinct tiers an affiliate partner can sign-up for; the Music Fan, The Affiliate and The Music Mogul.

The first tier, Music Fan, is for the general consumer or music fan who wants to feature tracks of his/her fav artists by embedding links to specific titles from BurnLounge’s catalog on their personal web page. The more tracks sold, the more points earned for redemption on BurnLounge.com’s site for prizes distributed as products or downloads.

The second tier, the Affiliate, is a program that turns downloads into cash. Targeted to small and medium sized web sites, BurnLounge will license their technology (basically a fully-functional download store with complete backend and transaction technology) for a richer user experience. Take this package and share a percentage of your download revenues with BurnLounge.

The third tier, Music Mogul, has a chief sponsor (or “mogul”) signing up a number of other web-based partners to create their own mini-network of sites. The Music Mogul manages those relationships, benefitting by taking a commission of sales of all tracks on his/her own download store as well as a percentage of all transactions within the mini-network of sites he/she is credited with signing into the program.

I admire BurnLounge.com for coming up with a way to spread their brand and using web services to generate sales with this multi-level marketing strategy, however, there are a few kinks in the armor if anyone thinks they’re going to make millions tomorrow from music downloads.

Mom and Pop are up against a formidable array of legacy download providers who currently have a tight strangelhold on the market and benefit from preferential treatment because of their size, traffic and revenue generating capability.

Take into consideration the folowing:

Today, Reuter’s reported from MIDEM, the world’s largest music industry conference going taking place this week in Cannes, France, that with over 355 digital download stores in existence, many music industry executives are talking about the bubble bursting, afterwhich industry consolodation takesplace.

The article reported Napster is stating over $100 Million in cash reserves and 500,000 registered subscribers paying $9.95 a month. Not bad work if you can get it. One web site generates all those subscription fees! And, people said that would “never happen!” Well…it’s happening!

Real Networks claims 1.2 Million subs to its Superpass and Music store subscription service. Today, I cancelled my account because I can’t play Real files on an iPod, and frankly, I’m not interested in listening to radio content from sub-saharan Africa. I guess there are many people who need or want that kind of programming. More power to’em, I say! I love Real. I even own stock in Real, but until interoperability takes place, I’m on the sidelines for now.
The iTunes store, benefitting from Apple’s powerful marketing muscle and convergent digital lifestyle strategy, have to date sold over 500 Million downloads and almost 40 Million iPods. Remember, iPods can only play AAC and MP3 format. Sales of digital media players that play all other formats, including Sony’s A-Trac, Microsoft’s Windows Media and Real Networks Real Media lag far behind.

You cannot purchase songs from Burnlounge, unless they were in .mp3 format, to play on an iPod. It’s common knowledge that Apple will not license their proprietary AAC encoding format to other companies as they protect their idea by maintaining their market share and dominance. This single fact slices your potential download market in half or even more! No one at the event said anything about that. All they said is, “you can make money too.”
In addition, consider this:

BurnLounge.com license their tracks from LoudEye, a digital distributor. The company charges a (according to the biz dev person I spoke with on the phone two weeks ago) $100,000 upfront payment to help a client launch an online store using their technology with an additional $10,000 a month licensing fee to keep it running and have access to their music database.
The woman I spoke to broke down the commission structure for me. First, the label take is about $0.70 cents per download. Then, LoudEye takes between, I think she said, $0.12 to $0.18 cents a transaction, depending on the deal you broker with them.

So, for arguments sake, let’s say it’s $0.15 cents. BurnLounge.com takes $0.05 cents per transaction when you sign up with them. So, between the labels, LoudEye and BurnLounge.com, the total take before you see any money is a grand total of $0.90 cents. I think there’s even another split of a few cents for the publisher, or something like that, but don’t quote me on it, because I’m not exactly sure. Maybe that comes out of the label slice. I’d have to research it a bit more to be exact.
If you’re an affiliate, you have to share that $0.10 cents with your “mogul,” leaving you with 5 or 6 cents on the dollar. Now, figure in your overhead, web maintenance, employees, marketing costs, etc…

You’re making a few pennies on the dollar. You’ll have to sell hundreds of thousands of downloads to make any kind of real money. After marketing and promotion costs and other costs of doing business, it just doesn’t make fiscal sense to open a BurnLounge store. I’d rather go out and find investors and compete on a level playing field, then give BurnLounge my money and have to work ten times as hard to make ten times less than I could if I were and independent download store owner.
The BurnLounge folk say one of their partners, a Hawaain-based lawyer, made $50,000 dollars in commissions last month. His store consists of hard to find Hawaiian music, as I’ve been told. And, we don’t know what the terms of his deal are. Does he own the actual music? Is the music he’s sold considered major label music or is it niche music that only he has the rights to?

If you’re one of those 140 in the room, you’re competing with everyone else in that same room by having those same million tracks from LoudEye. The only differentiation is how you want your store to be perceived. Content on the home page can be changed to feature music that may interest your target audience, but is that the point?

Oh, one thing I forgot to mention, BurnLounge.com’s start-up fee is $144.00 or so, plus a montly subscription fee of around $12. So you’ve got to sell a lot of downloads to make up that estimatged $360 for the year, before you even can think about turning a profit.

Again, I’m not saying it’s a bad idea. It can work for some people. If you’re a Music Mogul and you sign up 100 sites that are premium brands, and they use the technology effectively and market to their customers, you can stand to make that $50K a month in commissions.

It’s the slackers that will kill you. Sign 100 restaurants and lounges and hope that they upadate their music pages and promotional web sites on a timely basis. Make the sites an integrated experience with the brick and mortar operation and maybe you’ll see some traction, but when it comes to online production, it’s tedious work just like any other data entry job. Why do you think we’re outsourcing all this data entry work to India? Because American’s are too busy consuming to do that themselves.
Now remember, you’re competing against major players in the download world; Apple, Sony, Microsoft, Napster, AOL, Yahoo and maybe someday Google. You’re at a immediate disadvantage because the iPod only play AAC and MP3 formats for audio and .mpg and .mov for video.

Major label content downloaded through BurnLounge is encoded with a DRM using other formats that won’t play on an iPod. I’m sure there’s a crack somwhere, but at the end of the day, it’s all about access and portability, isn’t it?

If you’re sitting at home cracking proprietary files, that’s less time you have for the beach, running, work or doing whatever it is you love to do. There’s a reason why million’s have downloaded from the iTunes store–it’s called convenience.
Being a pioneer in the Internet music space, many of my friends from the dance music industry who were at the event asked me what I thought about the program. I told them out of the 150 or so people who showed last night, only 2 (besides the BurnLounge principals on hand) will make any real money. Everyone else will decide that it’s too hard and that no one told them they had to invest so much time, money, energy and passion into something that gave them pennies as a return on their investment.

As for Netmix, would I open open a store? Well, for me it would only be a value-add to my constantly evolving business plan to drive traffic. Kind of a loss leader, like Walmart selling DVD players for $25 and CD’s for $10.

I’m not going to start my own music store, so sure, I’d partner up with BurnLounge to see what happens. It’s a write-off for me if I don’t make my $360 back and maybe I can sell some of the tracks I feature in my mix-shows, who knows?

Do I plan on making money with it? Well, from the looks of the rev/share split, I’ll be on social security by the time I get my first real check. I mean, even though you see all these Google adsense ads on my site, not many people are clicking on them and I’m not really sure why. They’re not as relevant to my content as I’d like them to be, but it’s hard to manage that, unless advertisers came to me directly.
You’d think with about 30 to 50 visitors a day to this blog, I’d be making some money with Adsense and the Amazon program, but I’m not making anything that makes a difference…not yet anyway.

I tell people all the time. The Internet is not the holy grail. You still have to know and understand your customer, provide value and excellent service. That takes time, energy, commitment and possibly an investment of capital. It is what you put into it. I don’t post enough to get a mass audience and it’s slow going. In order to make any real money on the web, you gotta hustle. Just like everything else. Get rich quick schemes only make the ones who think of them rich, and everyone else is used for their brainpower and hard work.
Remember what they say, “if it seems to good to be true, it probably is.” But then again, they also say, “if you can’t beat’em, join’em!” Take your pick!

Here’s my Google ad below…I guess I’m joining them…lol.

  • http://www.netmix.com Tony Zeoli

    http://www.burnwithshaq.com doesn't even show up on the Alexa radar.

    Yay! Shaq has a Burnlounge store. Big deal!

    If I'm BurnLounge, I go out and create a few stores with some celebrities to make it look like I've signed some big deals, but at the end of the day, is anyone buying from those stores?

    My friend, anyone can have a store. Because there's not transparency, no one knows how those stores are doing.

    If you think Shaq having a BurnLounge store impresses me, you haven't learned a thing from our debate.

    Bottom line: I could care less that Shaq has a store. It doesn't convince me one bit that BurnLounge has a good business model.

    Tony Z.

  • Barry

    Tony it's NOT the fact that Shaq has a store….. It figures that's all you got out of that – Considering your tendency to mock anything you don't understand, I'm not even going to explain it… Why waste my time.

  • Ron

    This is an interesting debate concerning burnlounge. I think burnlounge has a promising future as it expands globally and offer additional features. I am quite sure ebay and other similiar online stores went through the same ridicule in its start-up days. To me, risk is associated with any investment; the question is, who is willing to take the risk?

  • http://www.southpawgrammar.com Kevin H.

    My simple question to all MLM pyramid schemers is this:

    How can it help me in the long run to sign up folks to compete with me for the same market share? How can signing up competitors be a good business model?

    There's never an answer.

    With Excel, with Amway, with Quixtar, with EVERY MLM, it always comes down to the top 2% getting filthy rich and the bottom 98% barely breaking even or losing money, and then the company goes under. Then the top guys move on to the next scheme, rinse and repeat.

  • Barry

    Sorry Kevin but you're wrong. For starters, MLM and pyramids are completely different. Pyramids have no product, legitimtate MLM programs do. And your 98% / 2% comparison is completely incorrect too. There are people who got into this one 40,000 people later and they're making consistent money at it because they're working it. And that market share comment you made defintely shows you do not understand MLM. Do you have the capability to reach EVERY person in this country? Do you know literally EVERYBODY? That's specifically why MLM does work most of the time, because if you know ONE person in another part of the country and they sign up and work this, you're now indirectly reaching people you would have never met. MLM gives people opportunities to affordably make businesses for themselves that they may not have been able to do via other ways of starting a business. Some make it huge, some make it OK, some don't make it at all – but that's how ALL businesses are. MLM at least provides the opportunity in the first place.

    Sure there are some programs that don't make it – just like any other business. But there are many more that do. And by the way, Amway and Quixtar are the same company. If you're going to criticize the industry, may I suggest you at least learn some about it.

  • http://www.southpawgrammar.com Kevin H.

    Barry–you're a funny person. Funny in a really sad way.

    So because I don't know everybody in the world, it's good to sign up competitors–from my church, from my family, from my friends, from my local area? Your big defense here is that I can't know everybody, thus it's no matter that I sign up direct competitors?

    Again–why, in any business, anywhere, would it be GOOD to sign up competitors to the same business you're in, often right in the exact precise same market area?

    Oh, and I know Quixtar is the internet incarnation of Amway. And I know the legal distinction between pyramid schemes and MLM schemes. Indeed, MLM schemes do offer legitimate products and services (albeit merely props to keep the pyramid scheme nominally legal).

    Show me one–ONE–MLM company wherein 90% of the representatives have netted any money. Hell, 50%. Or even 30%. Or 10%. Seriously. Show me the numbers. (Note: every single employee, 100%, at a freaking Wal-mart nets money, and the 2%, or 10%, or 20% make a good bit.)

    Excel Communications, maybe? Fastest growing pyramid, I mean company, to a billion dollars? The one Troutt sold for $3.5 billion before the pyramid collapsed and left all his representatives high and dry? The one about which the Dallas Morning News revealed the following?

    "Excel had 106,426 U.S. representatives eligible to earn commissions and that 64,967 actually earned commissions. Of those, 98.1 percent earned $100 or less. Only 99, or 0.2 percent, earned more than $1,000 for the month."

    And from Forbes:

    "Most recruits pay $195 to join, often mesmerized by visions of emulating Orberson. Excel is the country's fifth-largest long distance company, with 4.1 million customers. But Excel also boasts 1 million sales reps. That means the average Excel rep has only four customers, and one of them is himself. No wonder the turnover is so high."

    "In the manner of a chain-letter scheme, the pyramid relies on a stream of new recruits for its prosperity. The company netted a fat $144 million on revenue of $1.4 billion last year. Minus the $195 recruiting fees, though, Excel would have been in the red."

    And of course, when Excel went bankrupt just as quickly as they'd exponentially grown, the guys at the top had already sold out and were working on their next schemes. One of the top 5 guys at Excel, Alex Arnold, decided to go the music content route–and I'm sure you know this–

    he's now the CEO of your very own BURNLOUNGE.

    Excel went bankrupt because folks at the top of pyramids don't care if they're entering a worthless market that's about to go under–they just need to put together a buzzword-filled plan that'll convince enough people to sign up and send money up the line till it inevitably goes under. THAT'S the beauty of MLMs–you just come up with a catchy but ultimately doomed product, rope a bunch of infomercial watching sad sacks into signing up at a Howard Johnson's, let the pyramid grow under you until you make a ton of money, and then skip town.

    Yeah, that's a hell of a way to make a living.

    Seriously, if all these MLMs net good money for their representatives, there should be evidence all over for it. Where's some? I want to see it. I want to see an MLM, ONE SINGLE MLM, that has made money for anything close to a majority of its members.

    Better yet–just take a remedial math course, use a little common sense, and realize that these programs are scams, every single one, without exception.

  • http://www.netmix.com Tony Zeoli

    Bravo, Kevin H.!

    Let the numbers speak for themselves. And, I don't think I ever posted about Alex Arnold, but it's true he was involved in Excel, which went bust, and now he's back at it again. It's a sad world we live in when someone with his reputation is pulling the same scam twice.

    I want to see the numbers too. I've cited some Alexa traffic stats, but I know they are skewed because users must have the Alexa toolbar to register the hits.

    Even still, BurnLounge was no where to be found at SXSW. They may have sponsored an event, but where were they in the exhibit hall? They weren't. That's my point. For a company that claims to be for the artist and the individual, they had very little if any presence at the largest independet music festival in the world.

    Tony

  • Barry

    Leave it to Tony – again – to applaud the rantings of someone who obviously has no idea what he's talking about.

    Sorry Kev, you're wrong. Dead wrong. PLEASE EXPLAIN TO ME HOW THE PEOPLE YOU SIGN UP ARE YOUR *COMPETITORS* KEVIN(????) How Kevin? You sign someone up, THEY'RE NOW ON THE SAME TEAM AS YOU ARE KEVIN!!! You're working together now Kevin! You're now making money for each other Kevin! I mean, that is like the single most basic aspect of MLM, and you, and OF COURSE Tony, think the people you sign up are "competitors"… It's just unbelieveable and ridiculous that you could look at it that way, that you 2 can be so corn-fused about this. This is like a bad trip in The Twilight Zone. It's the most simple concept, and you just can't get it. The very fact that you would even consider them competition is the best possible example one could give to demonstrate your lack of knowledge in this industry. And I'm sure that glass-half-empty attitude spills over into every other part of your lives. Negative negative negative. How you 2 make it from day to day must be a story in itself. I'll betcha one thing – it ain't by selling anything.

    Tell ya what – instead, go open up a franchise business of some sort – see what less than an IMMEDIATE $50,000 – $100,000 downstroke in franchise fees and inventory and retail space gets you (especially in NY Tony) with NO guarantee of making a dime. You 2 are like the delerious leading the blind about this. Oooooh – $195. Try $150,000… I guess those people are just 'sad sacks" too, right?

    It's no secret that the majority of the people in this country who are in sales are not capable of earning their entire living that way. And sure, MLM is no different. But the MLMers didn't put down $100K either.

    I don't care what MLM company it is, if you join one of these companies and you WORK IT, you'll likely make money. You work more, you'll make more – you work less, you'll make less – just like ANY other sales opportunity. You two of course have no idea what that means, because you're obviously not selling.

  • http://www.netmix.com Tony Zeoli

    Barry,

    Okay mister, here's one for you. You're in a nightclub hanging out with two other Burnloungers who are not members of your team. All three of you are soliciting anyone in the nightclub who will listen, they should become a member of your team and not the other one's team. Now, how is that not competitive?

    With a franchise, yes, you do pay a franchise fee. With that franchise fee, you gain some rights and control over your territory. You are guaranteed that no one can open up another franchise within a certain distance from yours, unless you are in an incredibly high traffic area, for example, Times Square. There are two McDonald's in Times Square, but they are at lease 50,000 feet from each other. And, food is a necessity, not a frivolous purchase.

    Sure, you get into BurnLounge for 600 bucks a year, but you have to compete with other BurnLoungers who could be standing right next to you for those sign-up fees you so covet.

    I haven't yet heard one BurnLounger talk to me about how many songs they've sold. It's all been about signing up other BurnLoungers. So, since you started posting here, how many tracks have you sold, Barry? How are you doing competing with iTunes? Rhapsody? Napster? Ruckus? Of course, 1 Billiion songs are traded each month on file sharing networks, but BurnLounge is immune to that, aren't they? Sorry, I forgot, they're the new user generated download revolution.

    Where are all the new products, Barry? The phone service, the ticket sales? How are those shaping up?

    Barry, BurnLounge didn't even have a booth at the biggest indy music conference in the world, SXSW. Why? Sure, they sponsored a party, but noboby was talking about it. The SnoCap/MySpace partnership will take artists away from even thinking about BurnLounge. And, there are 20 other companies out there providing tools for artists to sell their products to fans.

    BurnLounge is burned out, Barry. It was supposed to be based on music, giving the artist back some control, but all they've given is dollars around signing up other BurnLoungers, and no real choice on which player to use. There are 100 million iPods in the marketplace. You tell me how many of those iPod owners are going to download third party software to crack a WMA file and convert it to MP4/AAC.

    I would NEVER buy phone service through BurnLounge when I can go direct to Verizon or AT&T. I would never buy music from BurnLounge when I can get it from iTunes, downloaded directly into my computer without a glitch. I would never buy tickets from BurnLounge, mainly because I just found StubHub.com. That's the new way to purchase tickets instead of using Ticketmaster.

    Barry, you're fighting a failed concept. It's not about MLM anymore, it's about products and service. It's about presenting a great concept and executing. To me, BurnLounge will always be a house of cards. Moving into China? Please! What BurnLounge executive has any experience in the Chinese market. You show me an Amercian MLM company with the wherewithal to make it in the Chinese marketplace, especially one like Burnlounge that doesn't have the capital to even approach that enormity of that market. While we're 300 Million here in the U.S., China is 1 Billion plus. The largest market in the world, and half don't even know what digital music is.

    Anyway, I gotta go take a shower and get to my real job, where you know, I don't sell anything according to you. Except for the fact that we've now had Fergie, Mary J. Blige and The Game and Kanye West on StarStyle, and upcoming are Fall Out Boy, Snoop Dogg, Ne-Yo and Gwen Stefani. Our sales department is closing deals with major online retailers. We have deals with Fox, Fremantle, Disney and more. And, I'm working on Sony/BMG and MTV. But, yeah…I don't know what I'm doing. I have no clue. I might as well quit my night classes at NYU now and burn my three Dean's List certificates. Maybe I'll go work in a restaurant at night as a waiter, because that's the only marketable skill you think I have.

    Tony

  • Barry

    Tony your A.D.D. is cropping up again – here's Kevin's EXACT question:

    "How can it help me in the long run to sign up folks to compete with me for the same market share? How can signing up competitors be a good business model?"

    And that's what I responded to, his direct question. Nobody said anything about 3 guys being in a club going after the same person. So Kevin's question proves he's clueless about the MLM industry as a whole, and you *AGAIN* proved that you don't pay attention to what you're responding to.

    Hold on, gimme a minute to go back up to your post to shred it a little more – – – –

    OK, I'm back. Yes Tony, you're right in that buying a franchise gives you some territorial rights – but at an often HUGE cost. You're immediately behind a HUGE 8-ball. If the business fails you probably go bankrupt. In some cases you lose everything. Creditors crying in the streets… I've seen it before – people take their pension in a lump sum, buy a business that fails some time later, now they're financially screwed and practically starting over at the age of 60 (that's the type of the-sky-just-fell scenario that you seem to attach yourself to, just thought I'd show you that I do pay attention to what you say here). You'll never see such a scenario in MLM, yet the reward can be greater on the MLM side if your timing was right and you work hard. I won't go into why, because I've already lost you this far into this post anyway…

    OK, what else – BRB – – – – Who said anything about China? Not me. But MLM happens to be big overseas, especially in Asia.

    I never once said you don't have marketable skills Tony, I said that when it comes to MLM you're completely clueless even though you've said things about what you look for in a career that follow the MLM industry to an absolute T, and that you're a complete pessimist when it comes to things you don't understand and that you mock those that you don't agree with. There's a difference.

  • http://www.smallstages.com keith

    Barry— the question remains— how many tracks have you sold, and what kind of money have you personally made from their sale?

  • http://www.netmix.com Tony Zeoli

    3 guys in a club going after the same person is akin to trying to sign up a competitor. While you're competing with others in your market for that person, you're really signing-up your own competition. The more people you sign up in your immediate area, the more competition you have for such a small slice of the pie.

    First, since you don't have the territory protections of a franchisee, there could be 5 current BurnLoungers within a radius of 300 feet at a Burnlounge event, in any given location, trying to sign-up newcomers and/or trying to get people to buy music.

    Okay, you were responsible for signing up one of the other four in the room. So, now you have the advantage. But, do you? So, you and yours are a total of two people to attack the market of potential customers within that 300 ft. range, and you're still competing with other Burnloungers not in your up or downstream for their attention.

    The pool of customers is limited by the fact that a high percentage of them did not come to the event to purchase anything or get involved with BurnLounge. So, that leaves your pool of people to pick from infinitely smaller. Maybe 10% of the audience is interested in the pitch.

    Say the BurnLounger you signed up begins to beat you to the punch everywhere you go together. He/she starts signing up more people than you. "Hmmm…," you wonder. "My commissions are getting smaller, because I'm not signing up people directly. He's signing up people in my chain. Sure, I'm getting a percentage of his commissions for doing nothing, but I'm not getting the full value of that person. I've diluted my own profits, because now I'm just letting someone else do the work. Sure I get something, but I don't get the total fee and now I'm losing money being out here, competing with my own sign-up."

    Okay, so that may not a perfect example, because you're still getting something; Just not as much as you would if you signed those new BurnLoungers up yourself.

    But, let's see what happens when the other four have no links to your chain. Then you're competing directly with four others in the space. If they sign up ten new BurnLoungers and you end up with none, then you're in the negative.

    You spend 5 hours trying to sign-up people, but that 5 hours is now over. You would say it didn't cost you anything, but it did, because you're working. You've now basically worked for free. If you work, the expectation is that you're rewarded financially. If you sign up four people in 40 hours, how is that profitable for you? I'll work forty hours and make many times more than the Burnlounger. When are you profitable, Barry? When does the time plus the effort you put out turn into profitability?

    First, you can't live on sign-up fees alone. And second, the profit margin in a digital download is so razor thin, you have to sell tens of thousands of tracks a month to make any real money. We've already gone through that exercise.

    Let's get back to franchising. People need food. They don't need music. If I buy a McDonald's franchise license, I'm virtually guaranteed someone is going to walk through that door, unless my francise is in the desert, hundreds of miles from civiliation. People don't need music, nor do they need concert tickets. Over 800 music stores have closed in the last two years, because people don't need to walk into the store anymore when they can just download it online FOR FREE! How can BurnLounge compete with 1 Billion songs a month being downloaded for free? How can BurnLounge compete with iTunes?

    If they so desire, one can go to iTunes, which works on both Mac or PC and download music to one of 100 Million iPods that exist in the marketplace. Zune…please! That's a joke today. Maybe someday MS will catch up, but it looks like it's going to take years and millions in a marketing spend to get that to happen. Apple's iTunes is alread profitable. They have employees who work everyday and make decent salaries with benefits and vacation time, and they reach tens of millions of consumers, where BurnLounge hasn't even reached mass adoption yet (and probably never will).

    The BurnLounge platform only allows for the download of DRM"d Windows Media files, which cuts your market down so much, that there just aren't the number of people with players to justify the effort. If there are 40K BurnLoungers and about 10 million or so Windows Media enabled players on the market, with many of them connected to Napster, Rhapsody and other services, I don't see the money rolling in to a BurnLounger anytime soon, unless it's based on signing up 1,000 new people everyday.

  • Barry

    Tony, the level to which I SIGH when I read your responses makes me wonder how I don't hyperventilate. What the hell is this? –

    **Say the BurnLounger you signed up begins to beat you to the punch everywhere you go together. He/she starts signing up more people than you. “Hmmm…,” you wonder. “My commissions are getting smaller, because I’m not signing up people directly. He’s signing up people in my chain. Sure, I’m getting a percentage of his commissions for doing nothing, but I’m not getting the full value of that person. I’ve diluted my own profits, because now I’m just letting someone else do the work. Sure I get something, but I don’t get the total fee and now I’m losing money being out here, competing with my own sign-up.”**

    What you tried to portray as a negative is a TOTAL positive!!! Your whole example is so ridiculous, and I'm not just saying that because you're not a fan of this company, but because you claim to know more about MLM than I give you credit for, yet your example shows how little you actually understand. Burnloungers running around a club trying to find people to sign up – gimme a break. Most of the people in MLM sign up people they already know, not complete strangers.

    Let's say just for demonstration purposes that you get 10% commission from all of the people you personally sign up, and only 5% from the people they sign up and the people below that sign up. Yes, the people that your personally sponsored people sign up make more than you do, and you only make half as much. BUT, let's say that person signs up 4 people, and of those people, they each sign up say 3 each, and then those people only sign up 2 each. You're now making 5% off of 40 people – FORTY… And of those 40, you probably would have never met ANY of them on your own. They may live in states where you've never been. Now thru this, the company is only paying out 25% in commissions on your downline – 10%, 5%, 5%, 5%. Most companies pay 60% back out in commissions. So this example is just scratching the surface.

    I tried to make that as simple as I could, and if you still don't get it, do yourself a favor and close down this thread because ANYONE who actually understands MLM is laughing at you.

    You misunderstanding is so blatent that sometimes I wonder if you're doing this intentionally, like just for kicks.

    Here's another case of pure ridiculous – **Let’s get back to franchising. People need food. They don’t need music. If I buy a McDonald’s franchise license, I’m virtually guaranteed someone is going to walk through that door, unless my francise is in the desert, hundreds of miles from civiliation. People don’t need music, nor do they need concert tickets.**

    TONY, PEOPLE DON'T NEED GREETINGS CARDS, GIFTS, CANDLES, SPORTS MEMORABILIA, NICKNAKS, COACH PURSES OF THOUSANDS OF OTHER THINGS THAT ARE FRANCHISED EITHER – BUT PEOPLE BUY THOSE THINGS, DON'T THEY? It's amazing the level you'll go to in your effort to find the worst case scenarios.

  • http://www.netmix.com Tony Zeoli

    Barry:

    I don’t claim to know more about MLM than you give me credit for. I’ve never said that. You’re the MLM expert, not me.

    I disagree with your statement “Most of the people in MLM sign up people they already know, not complete strangers.”

    First, you want me to sign-up, and we’re complete strangers. Yes, we were brought together by this blog, but we’ve never met and you continue to espouse the benefits of MLM. I’m not going to look back through the old posts, but didn’t at one point you make me an offer to try it out myself.

    Second, a friend of my father is a Mary Kay rep in the Boston area. The last three times I ran into her, she approached other women at the events we were both attending and asked them if they’d ever considered becoming a Mary Kay consultant. She did not know any of the woman prior to meeting them that day.

    Third, many BurnLounge events are held at nightclubs where they try and recruit new members. Not that that’s bad, it’s just a fact.

    So, your argument doesn’t hold up. If BurnLoungers truly tried to sign-up just the people they know, you wouldn’t have the number of members the company argues it has today.

    I get your explanation. It sounds good in theory and I’m sure in practice on some levels. I’m not saying that what you’ve outlined here for us isn’t real. I’m sure it is.

    However, my thinking is that it’s working for a small percentage of the top members of the company who got in early. The success is not distributed or managed equally, and that’s my concern.

    Here’s something for you. Say you have 20 BurnLoungers within a 10-mile wide radius who all started off in the beginning. They are at the top level. Out of those 20, 10 are really active. Out of those 10, they’ve each signed up 10. So, now you’ve got 10 BL top level moguls with 10 people each. Maybe the market stretches out to 100 miles, which means the pool of prospective BurnLoungers diminishes as you travel away from major cities, where the population actually consumes more music than their semi-rural or rural brethren.

    Doesn’t it stand to reason, especially with the general (and non-scientific) rule of six degrees of separation, that at some point those 100 will be vying for the next group of 1,000? What if 3 out of the original ten have stellar teams that are signing up more than the other 7 because of that overlap, interacting with people who’ve already been approached on numerous occassions. There is no territory protection; it’s all about increasing the number of moguls, and has little if anything to do with selling music.

    You argue that BurnLoungers will buy music from each other, which to me is just another way of propping up a failing business. At what point have all the current BurnLoungers filled their Zune players? What’s left to buy?

    Additionally, what if those three teams at 33 strong begin to bump up against the other 77? How many people are actually interested in joining BurnLounge? There are an estimated 300 Million people in this country (I think that’s true…didn’t research that exact number), not all of the age or wits to be able to deal with a BurnLounge store. In the last year, there are far less than what one would predict if BurnLounge was an idea that you could quit your day job for.

    Who are the ones actually selling music? As far as I know, the discussion from BurnLoungers always centers around the profits from sign-ups and never around the profits from product sales. I’m concerned that it’s more about making commissions off the sign-ups than it is about selling a product.

    FYI, no, I don’t do this just for kicks. And, if someone is laughing at me, that’s fine. I’m okay with that. This is my opinion, and I’m sticking to it until someone shows me the real numbers being generated. To date, no one has ever done that, so I’m a disbeliever until I see the facts. How many people have signed up for BurnLounge? How much music is the company selling? What’s the churn rate? Where’s the growth? How are the new products doing in the marketplace?

    I want to hear from BurnLounge customers about the great experiences they’ve had using BurnLounge. I don’t hear a peep. I want to hear from BurnLounge executives who can tell me when BurnLounge will be profitable and what the growth strategy is. I hear nothing. I see nothing. I read nothing. Why? Doesn’t anyone want to provide an honest answer? Where are the facts?

    This argument is not about MLM, Barry. It’s about BurnLounge as a business model. It’s about digital music distribution. I could care less about MLM. How people want to make their money isn’t important to me. What I do care about is using the business of music and artists careers to build a shaky business model that may one day fall in on its interdependent self. The entrepreneurial road is littered with companies like this one that are truly visionary in practice, but in reality, their business model can sink at any moment and ruin many unsuspecting lives.

    Tony Z.

  • Barry

    I can tell you without hesitation that I never actually tried to get you signed up. I've joked about it, but it's pretty obvious that you wouldn't do it if your career depended on it. And even if you did, you'd likely do it thru someone you already know in NY or thru your myspace friends or who knows whereever else who would promise to never bring it up here. So my stance on it stays the same, that the majority of MLMers sign up people they know. And as you said, I'm the expert. There will of course be people who go after strangers, that goes without saying. Maybe in NY they're more aggressive about it. Personally, I'd be smacking someone upside the head if they ever tried that on me in a club…

    You basically answered your own 'what if' question. Of course there's competition since there are no boundries, but you're correct in assuming that there are approximately 300 million people in this country, and hold on to this because it's gonna turn your thinking upside down – the no boundry protection IS A BENEFIT over franchise businesses. Sit back and take a breath for a second, then come back and I'll explain – – –

    OK, ready? It should come as no surprise that franchises are ANTI-competitive. The other side of the equation of having a protected territory, is that you're also LIMITED. Now if being protected/limited is your thing, more power to ya. I'd rather have the competition and the freedom to expand. Is someone in Manhattan going to go out of their way to go to a McDonalds in Queens? Of course not, unless they have a reason to already be there. But a Manhattan MLMer can easily hook up with one in Queens and then have a Queens "branch". I have people in Ohio and Colorado in Burnlounge, and I'm talking to people in other states – could I do that with a franchise business? No. So both sides have their positives and negatives – it's just a matter of your own preferences. There are people who have become successful in MLM who would have NEVER been able to buy into a franchise before that. In my opinion, protected territories are for the weak.

    As far as your numbers scenario is concerned – the stronger will do better, just like any other non-territorial outside sales job out there. I've been in the insurance business for 20 years, and personally I couldn't care less about territorial protection, because I know that I'm better than most of the agents in my area. I literally haven't pressure-closed a sale since like 1988. I know what I'm doing, and people buy from me for that reason. And if someone right down the street from my office is doing better than me and he's doing right by the people he's selling, more power to him, he deserves it.

    I dealt with a guy today who was referred to me for health insurance for himself, his son and his mother. Ready to write me 3 checks. This is gonna sound like a contradiction, but because I know what I'm doing, I convinced him to stick with the company they have, just make some changes to the current coverages and save over $2600 per year in premiums. He was shocked, because he knows that I'm not going to make any money off of him even though I gave him valuable advice and spent time with him going over everything. Hey, it happens…

    Most people can't hack making a living completely in sales, ESPECIALLY straight commission. I can't shut up, so it suits me. As I've said before, a lot of what you personally look for in a career, a group of people looking in the same direction, same goals etc. is the exact same as MLMers. Most MLMers are the most positive people you'll ever meet. The fact that some do better than others (or some do better than most) is also no different than your job, unless of course everyone in your company is being paid the same amount. Should someone with 1/5 of the experience you have, 1/5 of the education you have, brand new to StarStyle make the same money as you do? Of course not.

  • Cube

    Hey there Barry, how's your Burnlounge store holding up these days? I'm sure you're retired in the Caribbean by now off of all that music you sold.

  • Mike

    fair-trade-music.org a new mlm in the music business has been stated, does it work for you?

    • djtonyz

      I'd never heard of this MLM before, so I'm not aware of what the company represents. I'm not sure the use of the ".org" domain is appropriate, given that a .org is generally a non-profit. It would be misleading to use the .org domain if this is a for profit venture.

      After reviewing the site you posted, I'm not sure where the artist profiles are or what it looks like to the fan. It also doesn't seem to state anything about the program, other than you can sign-up and set your price if you're an artist. I will have to further investigate.

      In the interest of full disclosure, while I was a strong opponent of BurnLouge, I know work for a 20-year old network marketing company, Market America, in Greensboro, NC, on project called Conquer Entertainment, which uses network marketing business rules to advance the revenue opportunities for artists around music sales, as well as lifestyle merchandise.

      Remember, the issues I had with Burnlounge were not on the MLM nature of the offering, it was the fact that anyone could come into the business and sell their friends a network marketing portal with no requirements other than to pay the fee. And, the company went to great lengths to hide the fact that you could not play Windows Media files on an iPod, which at the time was the predominant technology.

      In the Market America model, our network marketers must be a Market America distributor first, before they can take our 2-day trainings to get certified. And, each artist is assigned to one of our network marketers, so there is a one to one relationship and support for the artist in the program. This way, not everyone can get into the program, which keeps it highly specialized. Because the company is an established network marketing organization that adheres to regulations, it's not the same as Burnlounge, which required zero training and was predicated on selling stores to your friends and not driving interest to action from fans on downloads.