In a typical multi-level marketing or network marketing arrangement, individuals associate with a parent company as an independent contractor and are compensated based on their sales of products or service, as well as the sales achieved by those they bring into the business.

In a legitimate MLM company, commissions are earned only on sales of the companys products. No money may be earned from recruiting alone (sign-up fees). Some, less legitimate, companies produce revenues primarily by attracting new participants or selling them marketing services, as opposed to selling actual products. One must analyze the compensation plan to determine whether participants are paid from actual sales to customers and not from new-recruit bonuses or business support sales. - source (wikipedia on MLMs).

Initially, Burnlounge seems like a wonderful revolution in the music industry. Through my own internet surfing I have run across countless people with their own Burnlounge Stores and thought nothing of it!

In case you arent familiar with it, Burnlounge is a company that allows users to set up a digital music store. You sign up under one of three different levels for a set up fee along with monthly fees. At the bottom you get the chance to set up your own store within the site where people purchase digital music from you that you choose to carry, and you get a commission from these sales. At the top level, not only do you get this, but also the ability to recruit (and earn a bonus from recruiting) others to open their own burnlounge store. They themselves are also able to recruit in the typical MLM setup. You get bonuses from everyone signing up as well as a commission from both yours and their sales.

This is a legal pyramid/MLM. Unlike the common misconception that all pyramids are illegal, pyramid companies only become illegal when they break the FTCs rules. These rules are set up to make sure that the majority of profits come from the product and not the recruiting. Even calling them illegal at that point is misleading. It simply means the FTC can take action to shut them down. Looking at the digital music marketplace you will see that Apple selling mp3s for the same price as Burnlounge proposes barely breaks even, with a large market share. Burnlounge store owners can't compete with that large market share, and the immediate conclusion is that those who come in at the higher subscription levels stand to gain much of their profits from the recruitment of others.

This should be a red flag to anyone who has considered working with this company. Leaving the merits or lack thereof of MLM as a business model, you can see that Burnlounge is on the seedier side of such companies. They seem to be walking the line of FTC rules while using recruiting that appeals to a young and sometimes naive audience. Their banners say "Wanna be in the Music Industry?" when owning such a store is nothing of the sort.

There are many other resources for musicians to get their music out there, and for fans to feel a part of things. If you are looking to do that, ignore Burnlounge and keep looking.