Ok, so I researched the new “digital media distribution” mechanism that was proposed to me. It’s an MLM that essentially preys on musicians, and, like any Ponzi scheme, on vulnerable people and their friends, and their family.

I am taking a really interesting business course at UCLA at the moment on writing better business plans for independent features. One of the things that is most often stressed is honesty when finding investors. I find it serendipitous that this ancillary challenge, that is the allure of a get rich, while solving the unpaid musician dilmma is presented to me by someone who I trust and support, in the very ailing industry within which I am involved.

At any rate, I hope none of you get suckered in. I am even going to be cordial enough to those who have become involved and not list the company/model’s name. But in case some kind of MySpace/Open Your Own Music Store/Make Money Selling Others People’s Music thing comes around, but costs you more than you can justify – please read this excerpt from a document presented by the Federal Trade Commision:

PREPARED STATEMENT OF
DEBRA A. VALENTINE, GENERAL COUNSEL FOR
THE U.S. FEDERAL TRADE COMMISSION

on

“PYRAMID SCHEMES”
presented at the
INTERNATIONAL MONETARY FUND’S
SEMINAR ON CURRENT LEGAL ISSUES AFFECTING CENTRAL BANKS
Washington, D.C.

May 13, 1998

“Here are some tips that consumers and business might find helpful.

1. Beware of any plan that makes exaggerated earnings claims, especially when there seems to be no real underlying product sales or investment profits. The plan could be a Ponzi scheme where money from later recruits pays off earlier ones. Eventually this program will collapse, causing substantial injury to most participants.

2. Beware of any plan that offers commissions for recruiting new distributors, particularly when there is no product involved or when there is a separate, up-front membership fee. At the same time, do not assume that the presence of a purported product or service removes all danger. The Commission has seen pyramids operating behind the apparent offer of investment opportunities, charity benefits, off-shore credit cards, jewelry, women’s underwear, cosmetics, cleaning supplies, and even electricity.

3. If a plan purports to sell a product or service, check to see whether its price is inflated, whether new members must buy costly inventory, or whether members make most “sales” to other members rather than the general public. If any of these conditions exist, the purported “sale” of the product or service may just mask a pyramid scheme that promotes an endless chain of recruiting and inventory loading.

4. Beware of any program that claims to have a secret plan, overseas connection or special relationship that is difficult to verify. Charles Ponzi claimed that he had a secret method of trading and redeeming millions of postal reply coupons. The real secret was that he stopped redeeming them. Likewise, CDI allegedly represented that it had the backing of a special overseas bank when no such relationship existed.

5. Beware of any plan that delays meeting its commitments while asking members to “keep the faith.” Many pyramid schemes advertise that they are in the “pre-launch” stage, yet they never can and never do launch. By definition pyramid schemes can never fulfill their obligations to a majority of their participants. To survive, pyramids need to keep and attract as many members as possible. Thus, promoters try to appeal to a sense of community or solidarity, while chastising outsiders or skeptics. Often the government is the target of the pyramid’s collective wrath, particularly when the scheme is about to be dismantled. Commission attorneys now know to expect picketers and a packed courtroom when they file suit to halt a pyramid scheme. Half of the pyramid’s recruits may see themselves as victims of a scam that we took too long to stop; the other half may view themselves as victims of government meddling that ruined their chance to make millions. Government officials in Albania have also experienced this reaction in the recent past.

6. Finally, beware of programs that attempt to capitalize on the public’s interest in hi-tech or newly deregulated markets. Every investor fantasizes about becoming wealthy overnight, but in fact, most hi-tech ventures are risky and yield substantial profits only after years of hard work. Similarly, deregulated markets can offer substantial benefits to investors and consumers, but deregulation seldom means that “everything goes,” that no rules apply, and that pyramid or Ponzi schemes are suddenly legitimate.”

From:
http://www.ftc.gov/speeches/other/dvimf16.htm

———
Don’t get “Burned” especially not at the expense of musicians who ultimately are the fodder.

For both sides of the story check this out:
http://www.digitalmusicnews.com/blog/310#comments

I guess my search for the new music market model continues…