The legal details regarding the Kompoz CD "All Over The Map" have finally been put to paper and blessed by the Kompoz attorney. It's been a very interesting learning experience for both me and my attorney. Along the way, I've learned a lot about the music industry, and he has learned a lot about open music collaboration -- a concept far outside of his normal recording deals.

During my first meeting with David (that's the attorney's name), I suspect he wanted to fling me out of his office window before it was over. He would go into great detail about how recording contracts work, and I would counter explaining why I wanted something totally different. "That's just how it works", he would say. "But Kompoz is different", I would say.

In the end, I think we came up with something pretty cool -- something that keeps the music under the creative commons, is non-exclusive, and pushes the bulk (60%) of the proceeds from any sales to you -- the artists! It's really more than 60% when you factor in the mechanical royalties (more on that below). The agreement we drafted, which we're calling the "Kompoz.com Participant Agreement", is designed to be as artist-friendly as possible. Download a copy and read it. 

The spirit of the agreement is this: You've produced some great music on Kompoz. The Creative Commons license selected for each project grants you ownership, and we're not trying to change that. All we want is to get your music distributed through retail channels, so we're asking for the non-exclusive right (your permission) to include your stuff on the album.  It does not diminish your ownership or rights to the song. You're free to enter into other agreements to distribute your songs in other ways and through other channels.

The agreement is pretty straight forward. I really stressed with David that I didn't want to create a zillion-paged document filled with legalese that only he could understand. I think he did a great job.

Show Me The Money

Here's the part about which I'm sure everyone wants more details.  Under "Compensation and Credit", the agreement makes two broad statements with regard to how royalties will be split.  The first statement is "KOMPOZ will pay a cumulative artist royalty computed at the rate of sixty (60%) of any and all sums derived from the exploitation of the Selected Composition or compilation album."  The second statement is "KOMPOZ will also pay one hundred (100%) of the publishing royalties due and owing to the Participants as the owners of the Selected Composition."

To understand what that means, let's walk though an example of a sale on CD Baby.  Let's say the sale price is $14.99 (which is the proposed price, by the way).  If the CD is sold on the CD Baby web site, they keep $4.00, plus any money collected for shipping.  So the net of $10.99 will be paid to Kompoz.   

There are 19 songs on the CD.  The first thing we have to do is pay the songwriter publishing royalties for each of the 19 songs.  By law, that is currently 9.2 cents per song, which as we stated, will be paid at 100% (believe it or not, most recording contracts add language to get around having to pay 100%).  Here's how we're doing to pay that out.  For a given song, we're going to divide the 9.2 cents among the contributors to the mix selected for the CD.  So if a song has 3 artists, each will get about 3 cents for that one song. 

So after we've accounted for the publishing royalties, which will be about $1.75 in total for all of the 19 songs, we're left with $9.24 ($10.99 - $1.748).  We'll now payout 60% of that to the artists -- about $5.55.  That's the "cumulative artist royalty" in statement one of the agreement.  Kompoz will retain 40% -- about $3.69 -- to cover expenses such as legal fees and CD manufacturing costs.  The $5.55 will be divided equally with the artists based on the number of tracks to which they contributed.  So for example, there are 48 artists in total that played on the 19 songs.  But some artists played on more than one track.  For example, MDK plays on 5, Nate on 2, etc.  So the 48 artists are really 71.  Therefore, we'll divide the $5.55 by 71, and payout proportionally.  That's about 7.8 cents for each song to which an artist contributed. 

To finish out the explanation, I'll use Nate as an example.  Nate contributed to two songs selected for the CD.  On the first song, there were a total of 4 artists (including Nate).  Therefore, the publishing (mechanical) royalties of 9.2 cents will be divided by 4, and Nate will get $0.023 for that song.  On the second song, there were also 4 artists, so Nate will get $0.023 for that song.  That's a total of $0.046 for publishing royalties.  He'll also get $0.156 for artists royalties.  So in total, Nate will get about 20 cents for each CD sold. 

I think these numbers are pretty accurate and very fair.  I've not yet sold anything through CD Baby, so I'm not sure if there are other fees that might be added in.  Also, I know that if the CD sells through iTunes or Amazon, the net they payout is far less.  The other thing that might change the numbers is the actual song list.  If we can't get signed participation agreements from everyone in time, we may have to drop or substitute songs.  Also, I'm going to look into other distribution options (including a Kompoz store) to try to increase the net we all share. 

I know there's a lot of information to go through in the agreement and in this post.  I tried to include as much detail as possible here (with examples) to make sure you all understand everything.  My goal here is to keep information out in the open so that we're all moving forward together.  So please comment, discuss, PM me.