The owners of previously reported US based online music service BurnLounge have announced they will alter their business model following moves by the Federal Trade Commission earlier this month to have the website closed down amid allegations the service was actually an illegal pyramid scheme.
As previously reported, BurnLounge is a scheme that allows music fans to sell music from their favourite artists via their own pages on the service's platform, and to earn a cut of any sales generated from their page. However, in order to do that they must first buy a BurnLounge subscription and, the FTC have argued, once signed up subscribers are excessively encouraged to sign up other sellers and, in fact, earn much more from recruiting new sellers than selling music. It is that fact which seemingly has led to the pyramid scheme allegations.
With the FTC taking action against them, BurnLounge have announced they will stop the 'network marketing' part of their business - ie encouraging subscribers to sign up other subscribers - and will focus their energy on the music sell through part of their operation. Subscribers will receive a larger cut of sales they generate to compensate for the loss of member introduction revenues.
It remains to be see if BurnLounge's announcement placates the FTC.