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BurnLounge has attracted its share of skeptics; detractors claim the company operates more like a pyramid scheme than like a legitimate digital music retailer, and the Federal Trade Commission agrees. It has filed suit against the company in federal court labeling the company "an illegal pyramid operation" and asking a judge to shut it down. 老域名购买

Here's the story: BurnLounge is a company that sells music. More accurately, it sells music stores. Anyone can get one, assuming they cough up the money to purchase the Basic Package, the Exclusive Package, or the VIP Package ($429 a year plus $8 a month, plus $6.95 a month to earn cash rewards). Once you have your music store, you can configure it the way you want and start selling tunes from major labelswith which the company has inked deals.

Since BurnLounge actively markets these stores to thousands of users, it's pretty easy to see that none of themstood a real chance of becoming the "next iTunes"—something that was held out in the sales pitch. Company representatives claimed that it was like putting a McDonald's on every corner, but of course there's a reason why there isn't a McDonald's on every corner.

According to the FTC complaint, none of this really mattered anyway, since selling actual songs to actual fans wasn't the waypeople made money. It was easier to make money by signing up new members, each of whom would open a store of their own. The original member would get a bonus and continued bits of revenue from these "downstream" stores, which would in turn sign up other stores. Each of these small stores, selling only a few tracks a month, would lead to massive profits for those at the top. In theory.

Unfortunately, the government frowns on businesses that rely on recruiting rather than sales of actual products, because such a business suggests that a pyramid scheme might be in operation. According to the FCC, "BurnLounge provides much larger rewards for recruiting then for sales of digital music and thus provides greater incentives to participants to recruit than to sell music to ultimate users." There's a whole promotional system that goes along with this (naturally), featuring encouraging DVDs and a magazine.

The company managed to line up investors to the tune of $13 million, even bringing in some cash from the man who allegedly brought "sexy" back—Justin Timberlake. Much of the company's energy was focused on recruitment, and FTC agents attended several of their promotional events in person and recorded quotes like, "Guys, we've made just under $300,000. Todd Ellis' next door neighbor has made $280,000. We've got a dozen people that have made over $100,000."

The pitch sounds good, but the agency dryly notes that "the compensation plan used by BurnLounge mathematically dictates that at any particular time the majority of Moguls [those who reap rewards from the network] will spend more money to participate in BurnLounge than they have earned through their involvement with the company." The company's actions violated the FTC Act, according to the agency.


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