This document provides background information on Octone Records LLC, an independent record label co-founded by Howie Lipson and James Diener. It summarizes Octone's strategic approach of signing and developing artists with mainstream commercial potential before partnering with a major label to further promote successful acts. It details Octone's unique partnership structure with J Records, a division of BMG, which allowed Octone to maintain partial ownership of artists it developed and transitioned to the joint venture. The partnership was designed to give Octone ongoing involvement in artist careers and avoid being acquired by the major label if successful.

1. J.T. Myers (WG06) and Patrick Pettay (WG06) prepared this case under the supervision of Professor Nelson Gayton as
a basis for class discussion and is not designed to illustrate either effective or ineffective handling of a business
situation. We thank Howie Lipson and James Diener for their help and support in preparing this material.
OCTONE RECORDS LLC
“I ask you how hot can it get?”
—Maroon 5, “Secret” (from Songs About Jane)
In the February 2006, Howie Lipson and James Diener, co-founders of Octone Records, saw their
first signing Maroon 5 win its second Grammy award. In a time where the music industry was experiencing
massive declines, their upstart label had managed to launch the career of one of the biggest new acts of the
last 5 years. In just under the last 4 years, Maroon 5 had sold more than 10 million copies of their debut
album, Songs About Jane. Diener and Lipson’s vision of forming an independent label that would have the
patience to develop career artists with significant commercial appeal had come to fruition, beyond even their
most optimistic expectations, much to their (and their investors’) pleasure. With Maroon 5 finally off the
road (after years of heavy touring) to begin work on their second album, and other Octone artists beginning
to generate noise, it was time to focus on the future. What was next for Octone?
THE MUSIC INDUSTRY
History. When most people talk about the music industry, they are referring to recorded music – the sale
of recordings (CDs, LPs, tapes, digital downloads, etc.). Recorded music got its start in the late1800s with
the invention of the phonograph by Thomas Edison. The “single” (a recording of an individual song
approximately 3 minutes in length, recorded on a shellac or vinyl disc, with a second recording on the
opposite side of the disc) was the dominant recording format in the industry until the mid-1960s, when the
invention of the LP (long-play) record and the emergence of rock music brought about a shift to the “album”
format (typically a collection 8 to 12 recordings on one product).
Record Labels. Record labels contract with music artists to record, market and distribute their
performances. Labels typically pay artists a royalty based on sales of the product. Upon signing, labels often
pay artists an upfront advance sum of money to record music and cover their expenses (this amount is
recoupable from their royalties). Labels emerged as a significant force in the industry around 1915, as
patents on recording technology began to expire. Since that time, the industry has been composed of
“majors” (large labels with significant resources who often own their own distribution networks) and
“independents” or “indies” (smaller labels with limited resources, and often focused on niche or emerging
musical genres, who usually contract for distribution through a 3rd
party). Over the years, it has been
common for independents at the forefront of an emerging genre to ultimately grow into majors themselves.
For example Atlantic Records became significant in the 1950s because of its early focus on the emerging
R&B and soul genres, and Def Jam similarly emerged in the late 1980s because of rap music.
By the late 1980s, there were over 20 major labels, about 75% of which were owned by 6 large
music companies – Sony Music, Warner Music, PolyGram, MCA, EMI and BMG. Since that time, the
industry has gone through significant consolidation, with many large music firms first acquiring the majors
they did not own, then each other. PolyGram and MCA merged in 1999 to form Universal Music, followed
by Sony and BMG in 2004. Today, there are half as many major labels – all owned by the 4 remaining
major music companies1
.
Throughout this time, independent labels have maintained a significant position in the music industry,
despite their occasional “graduation” to major status or acquisition by a major. In fact, the emergence of
1
The A-Z Book of Record Labels by Brian Southall, Sanctuary Publishing Ltd, Sanctuary House, London, UK, 2000

2. Octone Records LLC
2
digital technology has significantly lowered the barriers to entry for independent labels. As costs to produce
and manufacture a CD have declined rapidly, the number of indie labels has drastically increased, the
number of annual album releases has more than doubled from 15,000 to 38,000 over the last 12 years2
, and
indies’ aggregate market share has grown from 18.5% in 1998 to 23.5% in 2004.3
Industry Difficulties. By the mid-1990s, technological advances had made it possible for consumers to
receive and store music digitally on their PCs. File compression technology allowed consumers to convert
their CD tracks into computer files that were only a few megabytes in size. Labels were slow to exploit the
emerging digital opportunity, as sale of CDs was still brisk. Failure of the industry to satisfy consumer
demand for digital music led to the emergence of peer-to-peer file sharing technologies, such as Napster,
which allowed consumers to send and receive music files directly from other consumers without involvement
from (or payment to) the record labels. Napster became wildly popular, receiving significant media coverage.
The labels sued Napster, ultimately succeeding in shuttering the service, but consumers had become
accustomed to peer-to-peer and many just migrated to other similar services like KaZaa and Morpheus.
Compounding the labels’ trouble was the emergence of new entertainment options that competed for
consumers’ time and money, such as DVDs, video games and the internet. Finally, many consumers blamed
the industry’s troubles not on file-sharing, but on major labels’ increasing size, which they felt made it harder
for them to identify compelling new artists. Regardless of the reason, global industry sales declined by more
than 15% from 2000 to 20044
, with further declines in 2005.5
Bright Spots. Recently, labels had steadily begun to monetize consumer interest in digital music. Labels
made the individual songs in their catalogs available for purchase on services like Apple’s iTunes, which had
sold over 1 billion tracks at 99¢ each by early 2005.6
Labels were offering new consumption models in
subscription services like Rhapsody, which provided unlimited access to music for a monthly fee.
Additionally, applications in the mobile space, such as ringtones, offered new opportunities in a domain
where peer-to-peer software could not reach. Digital music had grown to 6% of the market by 2004 and was
expected to reach 20% by 2008.7
The impact on profit was even greater than that on revenue, due to reduced
manufacturing and distribution costs in the digital space (Exhibit 2 compares the margins of a digital
download to those of a physical CD).
The “Rest” of the Music Industry. While recorded music was on the decline, other areas of the
music industry had performed better. Revenue from the top 100 U.S. concert tours had grown at a compound
rate of over 12% from 2000 to 2005.8
Music publishing (ownership of song copyrights) revenue was up
slightly over the same period and expected to grow at 5% per year in the future.9
Additionally, artists were
leveraging their brands in new ways. Hip-hop star P. Diddy’s clothing line had over $450 million in annual
revenue10
. Madonna received over $10 million for appearing in a series of Versace ads.11
OCTONE RECORDS
History. The concept for Octone was developed in 2000 in conversations between James Diener, then VP
of A&R and Marketing at Columbia Records, and Howie Lipson, then Senior Managing Director of
Blackstone Group, a leading private equity firm. Diener, in his A&R role (“artists & repertoire” – signing
2
eMusic
3
Nielsen Soundscan. Includes indie labels and labels where major has < 50% ownership. Excludes Hollywood Records and Zomba Music Group.
4
See Exhibit 1
5
Nielsen Soundscan
6
ABC News: “Itunes: 1 Billion Served,” Jonathan Silverstein, 2/23/06
7
Warner Music Group presentation at UBS Global Media Week Conference 12/5/05
8
Pollstar – see Exhibit 3
9
Warner Music Group presentation at UBS Global Media Week Conference 12/5/05
10
“Diddy Does Broadway,” Celia McGee, NY Daily News, 4/26/04
11
Liz Smith, NY Newsday, 12/2/04

3. Octone Records LLC
3
and developing new talent for the label), saw an opportunity for an independent label to counteract what he
felt was the inability of major labels to nurture new, commercially viable artists over an extended period of
time. Lipson saw an opportunity to apply his extensive business and transaction experience in an industry
that he understood (he was the principal in Blackstone’s acquisition of the Columbia House music club from
Sony and Time Warner), but more importantly that he was passionate about.12
The two partners believed
that between Diener’s unique experience as both an A&R and marketing executive at a major, and Lipson’s
possession of financial and investor experiences rarely seen in the music industry, they could quickly
establish an independent label that would profit from the deficiencies of the existing majors and indies.
The partners agreed to form Octone Records. Diener secured talented executives for Octone,
including Ben Berkman, a former radio executive at Columbia Records and Warner Bros., to spearhead
promotion and artist development, and David Boxenbaum, a former management consultant with an MBA
from Columbia University, to serve as Octone’s General Manager. Meanwhile, Lipson successfully raised
$5 million in start-up capital for Octone from Wall Street investors.13
Additionally, Lipson’s creative deal
structuring, combined with Diener’s track record and credibility in the industry allowed Octone to strike a
unique partnership with J Records, a major label division of BMG (see below for details). After its launch,
Octone’s first signings were Maroon 5 and White Light Motorcade. The label’s current roster is shown in
Exhibit 5.
Strategic Rationale. At U2’s induction into the Rock n’ Roll Hall of Fame, Bono said, “[without] long
term vision…there would be no U2 after that second album…there would be no U2 the way things are right
now.”14
He was referencing the fact that the major labels’ infrastructure was no longer set up to allow new
artists to grow over a period of years, despite the fact that historically some of the industry’s largest
successes had developed precisely in that way. Structural changes at retail and radio had reduced the space
available to promote new artists and increased marketing costs to launch their careers. The majors adjusted
to these changes by focusing on their strengths – creating large-scale promotions around established artists or
selectively using their marketing capabilities to create a fast, massive push for a new artist at the launch of
their career. If this push was unsuccessful (an album selling less than 500,000 copies is usually considered
unsuccessful for a major), the labels generally abandoned the project and moved on the next release.
Independent labels typically had more patience with their artists because of their smaller rosters and
reduced expectations about what constituted a success. However, few indies focused on achieving
mainstream commercial success. Many did not aspire to reach beyond their niche audiences and cared more
about credibility with critics and tastemakers. This left upcoming artists with mass commercial potential little
choice but to sign with a major and risk their career for their “one shot.”
Octone saw an opportunity for an independent label interested in signing early-stage artists with
major label potential. Diener and Lipson felt that Octone could profit by doing the artist development work
that the majors were no longer efficient at doing themselves, and then working with the majors when their
strength in widely promoting those artists was ultimately needed. “The idea was to have an independent
label that could develop and incubate bands at a grassroots level by touring, word-of-mouth and press so that
it could begin to develop a fan base,” Diener explained, “And at the same time have a standing relationship
with a prospective partner who could help take Octone acts to the next level.”15
Diener knew majors would be open to external repertoire sourced from an indie, as they had
historically sourced artists from indies that had happened upon, often unintentionally, artists with mainstream
potential (e.g., Nirvana and Green Day). But Diener had also seen how little leverage these indies usually
had in such situations. The indie’s infrastructure would often be overwhelmed by the surprising success of
12
Management bios are shown in Exhibit 4
13
“’Incubator’ Rockers – Hot Act Maroon 5 Is Backed By Wall St.,” Tim Arango & Erica Copulsky, NY Post, 5/23/04
14
U2 Rock n’ Roll Hall of Fame induction speech transcript, U2, 2005
15
“’Incubator’ Rockers – Hot Act Maroon 5 Is Backed By Wall St.,” Tim Arango & Erica Copulsky, NY Post, 5/23/04

4. Octone Records LLC
4
the artist and it would not have the financial resources to extract the maximum value from the release, so it
would approach a major for a partnership. Of course, the major would know the indie’s situation and offer
an arrangement that left only a small amount of value with the indie (often a small royalty), but that it would
have little choice but to accept. Octone, given its plan to work with majors, obviously wanted to avoid this
type of situation. It would do so by ensuring that it was capitalized well enough to be able to fully launch an
artist itself. In this way, a major would have to offer a fair deal to Octone in order to access its artists.
Octone also saw an opportunity for increased integration of the A&R and marketing functions.
Frequently, major label A&R executives championed the signing of artists they were individually passionate
about without involving the marketing department in the decision process, even though that department
would be crucial to the band’s ongoing success at the label. Diener, in his role at Columbia Records, was
one of the few executives in the industry with responsibilities in both areas. Diener felt that successful new
artists needed both talent and viable marketing plan upfront in order to be successful. For this reason, all
Octone artist signing decisions would be made collaboratively by the core operating team of Diener,
Berkman and Boxenbaum, based on their collective evaluation of the artists’ talent, fit with Octone’s
marketing capabilities, and longer-term business prospects.
Octone / J Relationship and Structure. With its newly raised funding, Octone approached majors
about an ongoing relationship. The company wished to avoid dealing with partners on a case-by-case basis.
Octone preferred to create a true partnership where it could establish continued relationships with the major’s
employees and informally involve them in Octone’s artists’ careers before the major was truly brought in.
Octone found a willing partner in J Records, a major label within BMG. Lipson spearheaded the
negotiation of the deal structure, creating a relationship between Octone and J that was unlike any other in
the industry. The deal had three components:
1. Octone entered into a distribution deal with BMG Music Distribution (“BMGMD”), the distributor of J’s
own products. Under the deal, BMGMD would secure retail placement for Octone releases in exchange
for a fee.
2. Octone and J formed a joint venture, “Oct/Jay,” with each party owning 50%. If an Octone artist was
successful, J and Octone would agree to “upstream” the artist from Octone into the venture. Once in
Oct/Jay, the artist would be marketed and promoted by J (with all future funding provided by J), and any
profits earned would be split between the parties after Octone fully recovered any pre-upstream expenses
from the JV’s profits.
3. J entered into an employment agreement with Diener, making him SVP of A&R and Marketing at J, in
addition to his role of President/CEO of Octone. This would allow Diener to forge strong relationships
inside J, champion upstreamed acts within the company, shepherd the Octone artists through the
transition from Octone to Oct/Jay, and maintain the artist’s connection to Octone post-upstream.
The deal was structured with a term of 2 to 3 years (with all deal components co-terminus) to allow Octone
to transition to another partner if it was unhappy with the economics or cultural fit between the two entities.
In that situation, J would either buy Octone out of the venture, or any upstreamed artists would remain in
Oct/Jay and Octone would continue to receive its share of any earnings, but no new acts would be
upstreamed and Octone would be free to seek a new partner. Octone also secured favorable governance
provisions in the venture, which ensured that Octone’s creative and marketing philosophies would be
preserved post-upstream. Exhibit 6 details the deal structure. The deal was unique for an indie / major
relationship because it allowed Octone to maintain partial ownership in the assets created in its partnership
with J, and unlike most indie / major partnerships did not lock Octone in to ultimately being acquired by J if
successful. Additionally, the dual employment role of Diener was unheard of in the industry and observers
wondered if it might lead to conflicts of interest down the road.

5. Octone Records LLC
5
Diener and Lipson were extremely satisfied with the arrangement. As James recounts, “only Howie
could have set up this deal.” With all the components in place, it was time to start finding artists. It turned
out that Octone’s first signing, Maroon 5, would be upstreamed into Oct/Jay and go on to be one of the
biggest albums in the last 5 years. It appeared that Lipson and Diener’s business concept had merit.
MAROON 5
Much of Octone’s achievement could be attributed to the massive success of its first signing, Maroon
5. The band’s debut album, Songs About Jane, had sold over 10 million copies worldwide16
and more than 4
million in the U.S. (Exhibit 7 shows the cumulative weekly U.S. sales of Songs About Jane). The success of
Maroon 5 demonstrated the potential for Octone’s strategy of patiently developing a band to a point of
critical mass, where its major label partner could then use its significant resources to elevate them to large
mainstream success. The success was particularly impressive in light of the industry’s overall decline and
the flux within Octone’s partner J Records, which was first integrated with RCA Records by BMG, then with
Arista Records in connection with the Sony/BMG merger.
Through constant touring and gradually increasing radio play, Octone built interest in Maroon 5
regionally to the point that both the band and its audience were ready for that success. The process was so
extended that Maroon 5 received a Grammy award for Best New Artist in February 2005, over 2.5 years after
their album’s release. Exhibit 7 shows how different a sales pattern its strategy for Maroon 5 yielded
compared to other top hit albums of the time.
Signing the Band.17 Octone became aware of Maroon 5 through the band’s demo, which had made the
rounds at the major labels and had been subsequently rejected by almost all of them. Octone was particularly
impressed by the song “Sunday Morning.” After seeing Maroon 5 at a live label showcase, Diener, Berkman
and Boxenbaum agreed that the band had all the components Octone was looking for in a successful artist
that could develop over time: a strong live show, pleasing visual aesthetic, radio-friendly songs and good
work-ethic. Yet Maroon 5 was non-mainstream enough and lacked an established following to attract major
label interest. Octone and its investors agreed to sign Maroon 5 as Octone’s first artist in April 2001.
Over the following year the band recorded its debut album, with Octone urging the band to continue
working on its songwriting (ultimately, “Sunday Morning” was the only single on the album written before
the band was signed). As part of the A&R development process, Octone convinced Maroon 5 frontman
Adam Levine to recruit a new guitarist so he could devote greater attention to vocals at concerts. “He’s a
more talented performer if he doesn’t have to play guitar on every song,” said Diener. Songs About Jane was
finally released on June 25, 2002. It sold just over 1,400 copies its first week – last place on Billboard’s New
Artist chart.18
It wouldn’t even enter the Billboard Top 200 for almost a year.
Touring and Grass-roots Promotion.19 Touring was a key attribute to Octone’s marketing plan
from the very beginning. The company believed Maroon 5’s live performances were a key strength that
would allow them to build up exposure and strong word-of-mouth over time. Additionally, touring provided
a means to generate interest in the band within Octone’s budget. The touring plan for Maroon 5 began more
than 6 months before the release of Songs About Jane. The band rarely left the road, playing over 150 shows
per year through the end of 2004. The time helped the band hone their live performance, test out material
16
Octone management
17
Information in this section taken from “Maroon 5: The Road To Success is Paved with Hard Work,” Craig Rosen, Billboard Magazine, 6/4/2005,
and management discussions
18
Nielsen Soundscan.
19
Information in this section taken from “Maroon 5: Hit the Road,” Ray Waddell, Billboard Magazine, 6/4/2005, and management discussions

6. Octone Records LLC
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for the album, and begin to build fan awareness cost-effectively. ”We spent [the first] year traveling the
States in a 15-passenger van,” said singer Adam Levine.20
Octone was able to use its executive connections to leverage the band’s talent into opening tour slots
for other artists with strong grassroots followings such as Train, O.A.R. and the Pat McGee Band. “From the
beginning, the approach we took was to try and get the band on tours with acts whose audience would
embrace them musically and who would also be open to artists without [radio] airplay,” said band manager
Jordan Feldstein. By Spring 2003, the band graduated to opening for more established (but still
complementary) artists such as John Mayer, Counting Crows and Matchbox Twenty. That Fall, it embarked
on its first headlining tour, playing 1,000 seat venues, selling out every show. By the end of its touring cycle
in 2004, Maroon 5 was headlining 6,000-10,000 seat venues on the Honda Civic tour.
Radio Promotion.21 Upon release of Songs About Jane, Berkman, in chare of Octone’s radio
promotion, identified 20 key modern rock radio stations to approach with the band’s first single, “Harder to
Breathe.” While Octone ultimately had pop/top-40 aspirations for Maroon 5, they chose to approach modern
rock stations first for a number of reasons. First, modern rock stations had more of a history in adding music
from independent labels to their playlists, and they could tolerate Octone’s plan to build the band over a long
development cycle. “There’s a history and legacy at the format for its stations supporting independent labels
and new bands,” said Berkman “Also, [it] was the one format that would support the plan we had, which
wasn’t about blowing the band out at radio…but building things up from a grass-roots level.” Second,
Octone had practical limitations – its staff’s primary relationships were with modern rock programmers, and
breaking into top 40 required a massive field staff and connections to local stations across the country. “We
don’t have the ability to carpet-bomb the entire radio panel at once,” said Berkman.
To show its marketing commitment to the stations, and to increase local interest in the band, Octone
freely offered up the band to perform at station-hosted festivals, and significantly lowered the band’s CD
prices locally for a limited time when the song hit the airwaves. As audience research came back positive in
the initial markets, and as the “Harder to Breathe” began moving up the radio charts in February 2003, the
company wanted to use the momentum to expand its campaign to top 40 and pop. Octone and J decided it
was time to upstream the building act to Oct/Jay to harness J’s promotion muscle and take the next step at
radio. J recognized the building radio story as an indicator of a hit, creating enthusiasm for the project
among its radio promotion employees. Diener, in his dual role as employee of both J and of Octone, fanned
the flames and involved J before the upstream to ensure a smooth transition. “J Records/RCA Music Group
can be understood as ‘our relay race partner,’ who’s prepared to run the next leg of an important marathon.
However, it’s not as though they show up only in the middle of the competition. On Maroon 5, they were
prepared and waiting for their proper turn from the beginning,” he said, “It was a seamless transition because
no one at Octone had to beg them or prevail upon them to participate.”
Top 40 radio, compelled by the track-record Maroon 5 built at modern rock radio, added the song.
“Harder to Breathe” was a hit, ultimately reaching number 5 in mainstream top 40 format, number 15 in the
adult top 40 format, and number 13 in the modern adult contemporary format. Octone/J again used the
momentum to follow up with two number 1 mainstream top 40 songs: “This Love” and “She Will Be
Loved.” “Sunday Morning,” the song that initially attracted Octone’s interest, was the band’s fourth hit.
Video Promotion.22 Video, as one of the more expensive promotional tools for labels, was not a
priority initially for Octone. Only after the radio story for “Harder to Breathe” began growing did Octone
shoot a low-budget performance video of the song. But subsequent support from VH1 helped augment its
20
Maroon 5 official bio
21
Information in this section from “Maroon 5: Rockin’ at Radio,” Bram Teitelman, Billboard Magazine, 6/4/2005; “Maroon 5 Breaks Out Slowly
But Surely,” Mitch Pollock, Billboard Magazine, 8/16/2003 and management discussions
22
Info in this section from “Maroon 5 Breaks Out Slowly But Surely,” Mitch Pollock, Billboard Magazine, 8/16/2003 and management discussions

7. Octone Records LLC
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radio success. Once the band began to exhibit more mainstream success, Octone and J invested in bigger-
production videos. The first, for “This Love,” which featured an almost-nude Adam Levine and his
girlfriend in amorous embraces, received significant airplay and publicity for its provocative content. J
Records EVP Tom Corson said, “When that video hit, it just galvanized everything. It was sexy. It made the
band [members] stars, it made Adam a star. That was the launching pad to everything else.”
THE FUTURE
As Lipson and Diener reflected on Octone’s success, they also considered the opportunities and
challenges that faced them. A number of interesting things were on the horizon:
• Maroon 5 was working on its second album, which would be coming out in the second half of 2006.
• Michael Tolcher had sold about 85,000 CDs since his album came out in May 2004, and he had just been
upstreamed to Oct/Jay. He was on tour with O.A.R. and Hootie and the Blowfish, and his song “Sooner
or Later” was making inroads at radio.23
• Flyleaf’s album was starting to seriously heat up. It had sold about 100,000 units since its release in
October 2005, but was accelerating each week. For the week ending March 19, 2006, it sold over 11,000
albums – a 35% increase over the prior week. The band’s single “I’m So Sick” was top 10 in the active
rock radio format, top 30 at modern rock, top 5 on the Fuse video channel, and in full rotation on MTV2.
The buzz seemed to be building.24
But with all this excitement came concerns. In the short term, Songs About Jane would be tough for
Maroon 5 (or any band) to follow. How would the new album do? Good things were happening with Flyleaf,
but it seemed to be heating up faster than Maroon 5 did. Should Octone try and maintain its slow burn
strategy or turn the fire up now? When should they upstream Flyleaf to Oct/Jay?
Longer term, what were the prospects for Octone’s business? While Maroon 5 was huge and Flyleaf
seemed to be growing, the fact was that Octone had not yet had another success anywhere near that of Songs
About Jane. Had Octone just been extraordinarily fortunate with its first signing? Could Octone replicate a
Maroon 5-sized success?
It seemed that almost all the majors were now trying their own versions of “upstreaming” – Asylum
and East West at Warner Music, Fontana at Universal, and Or Music at Sony/Epic – to tap into the same
market opportunities Octone had identified. Some seemed to be fairly successful. Should Octone expect
increasing competition? What was its competitive advantage?
Diener and Lipson were also discussing signing 2 more artists this year, raising the question of how
many artists Octone could support while maintaining its current level of focus. Could growth and continued
success reduce their ability to fill the gap between independent and major? How scalable was Octone?
Finally, Lipson and Diener noted Maroon 5’s huge success on tour and couldn’t help but point out
that Octone had played a significant part in creating that opportunity for the band but did not participate in
touring income. Octone had succeeded while the overall recorded music industry declined, but should it try
to build more creative relationships with its future artist signings, where Octone would participate in other
revenue streams besides CDs?
23
Michael Tolcher’s weekly cumulative sales are shown in Exhibit 8.
24
Flyleaf’s weekly cumulative sales are in Exhibit 9.

8. Octone Records LLC
8
Exhibit 1: Global Physical and Digital Recorded Music Market (Historical and Projected)
Source: Warner Music Group presentation at UBS Global Media Week Conference 12/5/05
Exhibit 2: CD and Digital Download Economics
Physical Digital
Retail Price 18.00$ 0.99$
Retailer Share (6.00) (0.29)
Wholesale Price 12.00$ 0.70$
Distributor Share (1.80) (0.04)
Label Revenue 10.20$ 0.66$
Manufacturing (1.00) -
Royalties (2.95) (0.22)
Net Contribution 6.25$ 0.44$
% Wholesale 52% 63%
Source: Industry Estimates

9. Octone Records LLC
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Exhibit 3: Revenue from Top 100 U.S. Concerts (billions)
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
$3.5
2000 2001 2002 2003 2004 2005
Source: Pollstar
Exhibit 4: Management Bios
James Diener
James Diener is currently CEO/President of Octone Records LLC and Senior Vice President,
A&R/Marketing, RCA Music Group, a division of SonyBMG Entertainment. In 2000, Mr. Diener
simultaneously founded Octone Records and joined Clive Davis' J Records in its own formation with BMG
Music Entertainment. He was formerly Vice President of A&R/Marketing at Columbia Records/Sony Music
Entertainment - working with such platinum artists as Aerosmith, Pink Floyd, Bruce Springsteen, Bob Dylan,
Johnny Cash, Black Crowes, Terence Trent D'Arby, Tony Bennett, Roger Waters, Chris Whitley, Iron
Maiden, New Kids On The Block - as well as a roster of emerging and developing artists.
Mr. Diener began his formal career as a record executive in 1991 in the Marketing Department of Columbia
Records. Prior to that, he held various industry positions as a personal management associate and assistant
recording engineer. Mr. Diener graduated with honors from The Johns Hopkins University in Baltimore,
MD. He is an accredited record producer and member of both NARAS & the Academy of Magical Arts.
Howard Lipson
Howard A. Lipson is a Member of Pilot Group Manager LLC, a non-traditional private equity fund that
focuses on media and other marketing-driven businesses.
Prior to Pilot Group Mr. Lipson was a Senior Managing Director in the private equity group of The
Blackstone Group L.P., a firm he joined in 1988. While at Blackstone Mr. Lipson was responsible for and
involved in the execution of Blackstone's purchase of Six Flags, in which Pilot Group's founder Robert W.
Pittman acted as CEO; the acquisition of Graham Packaging and Columbia House, and Blackstone's
investments in Universal Orlando, Allied Waste Industries, Centerplate, MegaBloks, UCAR, US Radio, and
Transtar among others. He currently serves as a Director Universal Orlando. Prior to joining Blackstone, Mr.
Lipson was a member of the Mergers & Acquisitions Group of Salomon Brothers Inc.
Mr. Lipson graduated with honors from the Wharton School of the University of Pennsylvania.

10. Octone Records LLC
10
Exhibit 5: Octone Artist Roster, With Cumulative Sales Through 3/26/06
Artist Title Release Date U.S. Unit Sales
Maroon 5 Songs About Jane 6/25/2002 4,205,728
1.22.03 Acoustic 6/29/2004 634,262
Live: Friday the 13th (CD/DVD) 9/20/2005 155,168
Michael Tolcher Michael Tolcher EP 10/14/2003 1,852
I Am 4/6/2004 85,218
Flyleaf Flyleaf EP 7/30/2004 17,398
Flyleaf 10/4/2005 96,468
As Fast As TBD TBD n.a.
Dropping Daylight Take a Photograph EP 6/1/2005 5,699
Brace Yourself 4/11/2006 n.a.
Source: Nielsen Soundscan, Octone
Exhibit 6: Octone / J Deal Structure
Octone Records,
LLC
BMG
J Records
Maroon 5
“Uplift” Artist
50% ownership,
Increased
financial return
through J scale
and assets
SVP of A&R and
Marketing
CEO/President,
Shareholder
Marketing, Promotion,
Distribution, & Funding
50% ownership
Signs LT contract
with 100%
ownership by
Octone
Contract moves
under OctJay JV
1
2
Distribution of Octone Artists
Howie LipsonShareholder,
Strategic Advisor
BMG Music
Distribution
Distribution
of J &
Oct/Jay
Artists
James Diener
Oct/Jay JV

11. Octone Records LLC
11
Exhibit 7: Maroon 5 Cumulative Weekly Sales vs. “Typical” Major Release
Maroon 5 "Songs About Jane"
Actual Cumulative Weekly Sales vs. "Typical" Major Release* (000s)
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
6/30/2002 6/30/2003 6/30/2004 6/30/2005
Maroon 5 "Typical" ReleaseSource: Soundscan
* "Typical" Release is average of top 10 2002 releases, rescaled to Maroon 5's sales level
Exhibit 8: Michael Tolcher Weekly Cumulative Sales
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
5/9/2004 11/9/2004 5/9/2005 11/9/2005
Source: Nielsen Soundscan

12. Octone Records LLC
12
Exhibit 9: Flyleaf Weekly Cumulative Sales
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
10/9/2005 11/6/2005 12/4/2005 1/1/2006 1/29/2006 2/26/2006
Source: Nielsen Soundscan