Lawsuit puts BurnLounge in Hot Water
The Federal Trade Commission (FTC) has filed suit against BurnLounge and former University of South Carolina football player Rob DeBoer has been named in the suit. BurnLounge and DeBoer are being accused of running a pyramid scheme and misrepresenting the earnings investors made with the company.
My personal experience with BurnLounge is much like that of SC Attorney General Henry McMaster. According to The State newspaper, “McMaster suspected the company [Burnlounge] of being a pyramid scheme after hearing a sales pitch for the company with his wife.”
A friend recently tried to recruit me into BurnLounge. He had asked me to visit a website called yourburnteam.com, call a toll free number for more information, and then attend a presentation by former USC quarterback turned attorney Todd Ellis. Ellis is mentioned in the article linked above. I visited the site and called the number. Then I proceeded to warn my friend via email by saying, “This program is a multi-level marketing (MLM) strategy at the roots.”
BurnLounge retailers are expected to get customers simply due to having a personal relationship with folks. The customer buys music much like they would on iTunes. This lawsuit is likely resulting from the questions raised from potential retails like reading thins like this:
The investment is $430 per year in U.S. dollars, plus $14.95 per month. This may change for different geographies to reflect local economic realities. ($609.40 per year total with no guarantee) The upside is almost unbelievable, and Australia and Canada are the first countries that we are moving into.. In the first year, we had over 50 people earn over $100K, and several who earned from $400K to $600K in personal earnings. The amount of personal income that you create is up to you, but the opportunity to achieve life-changing income is real and attainable. (These bullet points were taken from the “Investment vs Return” section of a promotional email I received in late April 2007. My emphasis added in bold.)
Those talking about downloading the most music say they use torrents and P2P solutions. Those who buy their music fair and square from iTunes or Walmart.com have already busted past the initial impulse music purchase after acquiring a new digital music player for the first time. After a brief informal survey of friends using services like iTunes, I found that all fell squarely in the middle of the estimates made by David Caulton, a Zune contributer as reported on the Electronics Design Strategy News web site. David says:
“iPod owners initially buy 30 tracks in the first three months, but then drop off to one track per month or less on average.” Based on the above information and a couple of things that grabbed my attention in the “Back-end Compensation Tutorial Residual Sales” presentation on the myburnteam.com site, I was led to my decision to not participate. -Single orders totaling less than $9.90 DO NOT count towards your sales quota These bullets were taken directly from the “Back-end Compensation Tutorial Residual Sales” presentation on the Burn Team site. To see it for yourself, go to http://www.yourburnteam.com and enter as a Guest. Click on the menu icon once the Rob DeBoer flash video starts. You will find a section called “Compensation Training” that includes this “Back-end Compensation Tutorial Residual Sales” presentation. Oh, this presentation does not play well with Firefox. What all this tells me is that if the numbers give by David Caulton are even close, then revenue for a BurnLounge retailer from music downloads will be nonexistent after the first month a person joins. As a web site and blog builder, I can not image gambling $430 to see if I might be able to generate some revenue in much the same way I am already doing so with affiliate relationships that are FREE. I spend less than that per year in total web hosting expenses. I believe that BurnLounge is preying on the ignorance of those who have never built a blog or web site before. Intensionally? I don’t know. The amount of revenue a burn page retailer will generate is directly proportional to how effective they are at delivering visitors to their web pages. Any experienced web site owner will tell you that drawing traffic is not always a cakewalk, unless you are [uhm] something like a former college football celebrity with the name recognition that might be able to immediately draw a ton of Internet traffic. After you run through the references in this story, if you find that you just can not live without becoming a BurnLounge retailer, then I will hook you up with my friend. On the other hand, if you want to make money on the Internet the old fashion way, then just drop a comment in this post or send me an email (check the about page). I will be glad to help you get started for way less than $609 per year.
-A single order with (1) 99 cent track DOES NOT count towards your sales quota
-A single order with 10 or more 99 cent tracks DOES count towards your sales quota
June 12th, 2007 at 2:09 am
I’d like to make two quick points related to your statements.
First, you are slightly mistaken in your interpretation of the compenstation plan. While you state correctly that orders less than $9.90 do not count towards meeting your sales quota, what you are mistaken about is that you actually still earn revenue from those sales. Admittedly, the verbage in the compensation plan is a little unclear, so your interpetation is understandable.
Second, you are highlighting the most expensive package, which is certainly not for everyone. Burnlounge actually offers packages at four different price levels, including one which is actually free. Since people can get their own free package and then give their friends one in turn, the social network could grow quite rapidly. Presuming, of course, that Burnlounge can adequately show the courts they are not, in fact, a pyramid scheme.
Lane
June 12th, 2007 at 7:41 am
Lane,
Thanks for the clarification on the earnings in point one. That does not minimize the requirement to drive traffic to a web site in order to make sales.
On the second point, is it not required to purchase the most expensive package to realize the largest earnings quoted in the Burn Team literature? How much can a person earn from a sale made from their free package? I think I know the answer, but I would appreciate clarification.
June 13th, 2007 at 2:28 am
What confuses people with Burnlounge is that they have two distinctly separate compensation plans. The front-end plan is based on building the network of distributors, and is solely for those who opt for the mogul add-on to their paid retail package.
The most expensive package has the fewest roadblocks to realizing the largest earnings from bonuses associated with network building, but it is not necessarily the best option for everyone, even if they wish to participate in the team building aspect. For example, an artist who anticipates that they will be able to sell a lot of music through their own personal store in a short amount of time might decide to sign up as a Basic mogul (the cheapest of the paid plans). Once they meet the initial sales quota, they can receive the full value of the bonuses, just as the VIP retailers do. Of course, they would also be foregoing some of the products that the more expensive packages receive, but that is up to each retailer to decide for themselves.
The back-end plan, also referred to as the concentric retail plan, is for all retailers, and the commissions are paid on the sale of products only. Even free retailers can earn rewards from the sale of products through their own store, as well as any stores that signed up directly through them. Free store owners can not convert their rewards to cash, but they can redeem their rewards for company products, such as downloads and merchandise. They can also opt to use these rewards to upgrade their package to a paid plan, if they so choose.
The compensation plan is very well thought out, but it is not a simple one. I admit that the presentation of the key elements of the plan could use a little fine tuning, because it is routinely misinterpreted, making my job as a retailer a bit more difficult, since I often find myself having to clarify certain elements of it to those who are misreading it.
For those who wish to learn more about the compensation model, I suggest you go to http://www.burnlounge.com, and click on the tab labeled ‘What is Burnlounge’, then navigate down to ‘The Programs’ under that. You won’t get all the details, but you will get a brief introduction. If you want more information, you can go to http://www.burnrewards.com, and download the full official compensation plan under ‘Hot Links’.
If you have further questions, I would be happy to address them. Feel free to visit my page, or e-mail me at LSK@LounginginSD.com.
June 13th, 2007 at 6:28 am
http://www.ftc.gov/os/caselist/0623201/index.shtm
story: http://search.ftc.gov/cs.html?url=http%3A//www.ftc.gov/opa/2007/06/burnlounge.shtm&charset=iso-8859-1&qt=burnlounge&col=full+hsr+news&n=1&la=en
actual case complaint links.
I was bought in and never entered my credit card right at BL2 launch. JangleFish 2.
As a professional audio engineer and producer my intuition was right.
visit my page at http://www.myspace.com/themadengineer
As a consumer advocate http://www.resolvemydispute.com will report online fraud claims if your not refunded or responded to with a solution. We are listed with econsumer.gov and are going worldwide to help consumers.
Thanks
LR_Shedwood
http://www.shedwood.com
June 15th, 2007 at 2:24 am
Hey Lane:
Any reason you’re ducking the commentary at the BL discussion forum.
Many people have been dying to hear your defense of the latest Burnlounge debacle. Come home. We miss you.
March 15th, 2008 at 3:52 pm
Thanks for the info - I’ll check it out
Nice Blog by the way.