New York City-based BurnLounge is a company to keep an eye on. The company has raised $13 million from entertainment industry investors including Justin Timberlake. It turns music fans into promoters and sellers by charging for access to its catalog of music and web storefront tools.
The idea is to “take the street team into the twenty-first century,” says Stephen Murray, BurnLounge co-founder, president of entertainment, and chief creative officer. The three-and-a-half-year-old company launched in June after being in beta for eight months.
It generated $1 million in sales in its first month. Fans now operate 40,000
50,000 online retail shops, and the company claims it’s the fifth-largest music download site.
Murray admits that music generates very low margins — sellers earn 5 cents per song sold or 50 cents per album. The company gives doles out more money for selling BurnLounge stores (and soon merchandise), with an affiliate system set up that requires prospective store operators to sign up through a current store operator. Skeptics compare it to a pyramid scheme.
BurnLounge’s setup fees aren’t negligible; $29.95 per year for the basic store, and up to $429.95 per year plus $8 per month if you want VIP concert passes and such. Other complaints: the site makes frustrating use of Flash and only works properly in Windows. Downloads are WMA files, meaning they won’t play on iPods.
Playing to people’s cool kid aspirations on a slightly janky site? That sounds familiar. Party promotions also helped drive MySpace to the top…maybe BurnLounge will catch the eye of one of the hungry media moguls. BurnLounge may not be a social network, but that doesn’t seem to be terribly profitable anyways. MySpace itself just entered the customizable online music franchise business over the weekend.
The company is facing competition from startups and other large players Other companies that help fans to set up music shops include MySpace partner Snocap, Navio, and Musicane. BurnLounge claims that it is not taking customers from iTunes, or even P2P networks.
The company says the vast majority of its retailers and customers have never previously downloaded a single song from the internet. And these new buyers seem to be more partial toward full albums than those of the a la carte generation, with 80 percent of transactions involving at least one album. That’ll make the musicians happy.
And unlike the new MySpace music shops, this is not an indie play. Though BurnLounge adds 350 albums per week of unsigned music, according to Murray, its biggest sellers are far and away pop albums from the major labels.
(Surprisingly, “SexyBack” was nowhere to be found…did Justin give the exclusive to iTunes?) Occasionally heavy promotion brings a smaller artist to the top, for instance Coffey, a poppy Texan singer who likes to pose with the confederate flag.
Update: BurnLounge says its number of registered retailers is 40,000, not 50,000 as it had previously indicated.