By Antony Bruno
Startup digital music company BurnLounge wants to democratize the music retail business.
The Web-based service provides the music library, e-commerce tools and business management software for virtually anyone to own and operate their own digital download store. The company's founders hope to recruit everyday music fans, allowing each to decide which acts they want to feature and promote, as a sort of digital guerrilla marketing play.
"It's the reincarnation of the corner record store," BurnLounge president/COO and co-founder Ryan Dadd says. "This whole concept is about the next generation of retail. It's about marketing to affinity groups, to people with shared interests."
BurnLounge is essentially a digital store franchise. Regardless of operator, each store has the same look and feel, and all carry the BurnLounge brand. All also have access to the same music library, pricing and transaction system, powered by partner Loudeye.
What sets each BurnLounge store apart is the programming that the individual operator chooses. The service lets users decide which bands or songs to feature on the home page and each genre page, as well as create and promote customized playlists.
It also provides a host of digital marketing tools. These include an instant messaging application that supports all popular IM communities (such as AOL, MSN Messenger and Yahoo; chat rooms; and message boards), DVD presentations, posters, letterheads, gift cards and a quarterly promotional magazine.
"In the music business, we've always known that personal referrals and relationships lead to sales," says Stephen Murray, BurnLounge president of entertainment and co-founder. "The problem is there's been no way to quantifiably track that transaction."
That, he promises, is possible with BurnLounge. The company hopes to capitalize on this by marketing the service to artists and their managers, fan clubs, street-team marketing groups, labels, music retailers and others with a large audience of music fans. Radio personality Rick Dees is one, and he is an investor in the company.
BurnLounge offers these companies its top-level Music Mogul service, which allows them to set up their own digital music service as well as operate an online chain of stores. Music Mogul operators invite others to open franchises under their oversight via the Affiliate level of the service. These affiliate members then invite individuals to open their own personalized stores.
The company's initial challenge is to convince users it is not a pyramid scheme. No investment is required for inventory, a typical feature of such pyramid programs. But there are costs involved -- from $30 per year to a $215 upfront setup fee and $15 per month -- all for access to various levels of music and team management software.
"It's different than Amway because you don't have to buy the inventory, but it is multilevel marketing," says Mike McGuire, an analyst with Gartner G2. "But that can be a valuable tool. I think any product or service that's aimed at making the fan an artist's best salesperson is very important."
BurnLounge also faces competition from such Internet communities as Yahoo. Unlike BurnLounge, Yahoo allows users to write album reviews in its blog service, with links directly back to the Yahoo Music Unlimited store. But BurnLounge compensates its users for sales made via their recommendations; Yahoo does not.
"This whole class of products and services are really crucial to helping the industry make this transition into the digital media age," McGuire says. "These could become tools that help more consumers realize that (digital) can be a better way of getting and discovering music."
BurnLounge plans to go live before the end of the year, after its has secured deals with all five major label groups; EMI Music has already signed on.
The point, Murray says, is to create a market for lesser-known music by employing the community aspect of music discovery that the digital format allows.
"Hardcore music fans, that is our core demographic," Murray says. "They love music so much, and the idea of being able to tell their friends about the music they think is good and be able to sell it to them as a side job is really cool to them. The concept about the name BurnLounge is that it's about starting a fire ... that spreads."
Copyright 2005 Reuters Limited.
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