After coming under heavy fire from the Federal Trade Commission, Burnlounge is changing it's business model.
The FTC called Burnlounge's network marketing system a "pyramid scheme" and went to court to demand a shutdown. After gaining time to respond, the site first replaced it's CEO and now announced "a 
simplification of its business model that will eliminate the network marketing element...while providing greater business benefit for entrepreneurial members...".
The new service functions more like affiliate marketing systems already in place at Amazon and other online retailers and includes free software that enables download store and BurnPages with customizable widgets for promotion. Other higher margin entertainment products will also be added for sale including movies, videos, portable devices, and accessories.
How those who often paid heavy entry fees to participate in the earlier network marketing system is unclear, and we've asked Burnlounge for comment. (Full press release after the jump)
COMMENTARY - Harnessing the power of the fan to spread the word across the net and rewarding them for their efforts is a worthy effort that has been used to great advantage by other online retailers like 
Amazon. It's unfortunate that one of music's earliest and most visible ventures in that direction would have such a painful beginning.
Perhaps Burnlounge mistakes and new model will pave the way for other entrepeneurs who respect rather than take advantage of fan enthusiasm. But at the moment it feels like just another reason to hate the industry that stand between them and their music.
BURNLOUNGE SIMPLIFIES BUSINESS MODEL
New Model Will Drive Community Expansion and Greater Rewards Per Sale, Benefiting Retailers, Artists, and Partners
PRESS RELEASE - New York, NY, June 21, 2007 – BurnLounge, the world’s first fan driven digital download community, today announced a simplification of its business model that will eliminate the network marketing element of its business while providing greater business benefit for entrepreneurial members of the BurnLounge community.
The company intends to focus on its free service and will deliver increased rewards per sale. BurnLounge will continue to build strong partnerships and high-margin product lines providing a viable business for its members and artists. The free service is comprised of BL2, the software that enables anyone to open up their own download store and become a digital retailer; and BurnPages, a personal web page with customizable widgets.
“Despite our strong disagreement with the Federal Trade Commission’s complaint against the network marketing portion of the business, BurnLounge has voluntarily decided to make this bold move to show our commitment to our artists, partners, and independent retailers who have supported us from the beginning,” said Grant D. Johnson, chairman and chief executive officer, BurnLounge.
Johnson added, “Network marketing was a unique channel to promote our products, but not integral to the future success of the company and its retailers. We took this strategic action to benefit the greater BurnLounge community.”
With the new model, BurnLounge retailers will earn even greater compensation per sale in a more traditional affiliate marketing structure. The new model will be simpler, and retailers will soon be able to expand their businesses beyond music into high-margin entertainment products such as movies, videos, portable devices, and accessories.
“Our retailers are BurnLounge’s top priority, and we will make this transition together,” said Ryan Dadd, co-founder, president and chief operating officer, BurnLounge. “They have played a vital role in the growth of our company and we remain committed to their success. BurnLounge will continue to give its retailers strong revenue-generating products."
BurnLounge serves as a fan-driven promotional channel, and provides a great platform for artists to empower fans to sell their music. The BurnLounge free service harnesses the power of personal referral to create a complete system of social commerce.
Stephen Murray, co-founder, president of entertainment and chief creative officer, BurnLounge, added, “The new model is a win-win situation for our members, the company, and for the industry. It is a revolutionary concept and a revolutionary product. Making this change to our business model to focus on our core products of BL2 and BurnPages makes it much easier to grow this community.”
BurnLounge Magazine, BurnLounge Presents, and BurnLounge Event Pass will continue to be accessible to BurnLounge members. More details on the announcement are available at www.burnlounge.com
About BurnLounge
BurnLounge is the first fully functioning network of socialization and sales, combining digital downloading, community building and personal entrepreneurialism in one place. Through this innovative model, BurnLounge provides entrepreneurs, artists, movie moguls and music lovers with a new recommendation-driven promotional channel. For additional information, please visit http://www.BurnLounge.com
