Several of our clients have contacted us asking questions about the REDPLAN model content license agreement (MCLA), described on REDPLAN’s website, in emails to MLSs, and in an Inman News story. It is intended for use by MLSs in direct syndication deals with portals like Zillow, Trulia, Realtor.com, etc.

I’d like to clarify that our firm had nothing to do with drafting this document. We cannot recommend it based on its content, because we don’t have a copy. We saw an earlier draft, version 2.51, back in December 2014—more on that below—but I have no idea how similar that is to the present version.

Though I actually recommend that you pay the money to get a copy of the REDPLAN MCLA, I’d also like to suggest a bit of caution regarding form agreements of this kind for several reasons: (1) Working with the portals to develop a “compromise” agreement leaves value on the table if MLSs don’t ask for things that they might be able to get (or at least partially be able to get). (2) These agreements are a moving target, and you should not expect a standard agreement that results from industry-wide compromise discussions to represent the best possible deal today. And (3) model agreements are not necessarily a way to save money. I’ll elaborate on each of these items. I’ll also briefly describe a project on which we are working that might be productive.

First, working with the portals to develop a standard agreement is negotiating against yourself. Such documents may have real value, but you must regard the terms in them only as a floor and not as a ceiling. Starting with an agreement that the portals have already said they’d be willing to sign is potentially leaving a lot of value on the table. You will never know whether a given portal will agree to a term unless you ask for it.

In REDPLAN’s judgment, certain practices of the major portals are not “going away,” or are “a trend we’re not going to stop.” The problem with leaving out a term from the model agreement because it’s a deal breaker for one portal is that it incorrectly assumes all portals will object to the same term. For example, Portal A may object to clause X, but is fine with clause Y; and Portal B may object to clause Y, but is fine with clause X. A resulting model agreement that appeases both portals will exclude clause X and clause Y, even thought Portal A would agree to Y and Portal B would agree to X.  Thus, it doesn’t benefit MLSs or brokers to aggregate concessions for multiple portals into one agreement.

With oblique reference to Mitch’s excellent post on negotiating terms for direct syndication, REDPLAN suggests certain terms are impossible or irrelevant. Most brokers do not think them irrelevant. And though they may or may not be impossible, I can assure you if you don’t ask for them, you won’t get them. Requesting terms that are important to the MLS and brokers opens a dialog about the portal’s activities and can lead to limitations or clarifications of those activities. As Mitch said in his post:

Asking for [these items] helps frame up the various portals’ offerings, even if they decline to accept a request. And the more MLSs that ask for something, the more likely the portals will look for ways of meeting the need.

I compared a version of the MCLA we saw in December (version 2.51) with Zillow’s standard contract offering to MLSs from November of 2014. Whole swaths of the MCLA were language that was nearly identical to Zillow’s agreement. I don’t want to minimize the many improvements in the MCLA version over the Zillow agreement, and I assume there have been others since. But I can’t see why we would start with Zillow as a model. A model agreement for MLSs should start with all the things that an MLS might want and then work back from there based on what each portal is willing to give. Seeing what each portal will and will not agree to in such a model allows an MLS’s leaders to compare portals’ offerings apples-to-apples, rather than accepting the least common denominator of what they have on offer.

Second, these agreements are a moving target. We see certain portals this month agreeing to things they would not have agreed to six months ago. Last fall, our clients were coming up with creative things to ask for that are not represented in the December version of the MCLA. The things our clients are coming up with now are not likely to be in next month’s version of the MCLA either. If this agreement is updated periodically, and only after “compromise” talks with the portals, you can expect it to fall short of the best deal you could get for your MLS.

Third, model agreements are not necessarily a way to save money. For example, in most cases we negotiate portal agreements on a flat-fee basis. Thus, if your MLS asks for the moon and takes a couple weeks to negotiate back to something that the portal will accept, you do not pay us more than if you offer the portal an agreement that it has had a hand in drafting and is immediately prepared to sign. And we think you’ll get a better deal that you and your leaders will understand more thoroughly. What’s more, in many cases, it should be possible for an MLS to recover our fee in the negotiations with some of the portals, if that’s what your MLS seeks to do.

Having said all that, there may be a place for group efforts (keeping in mind potential antitrust risks). For example, we are just now starting a different kind of project: We are working with one of the providers of MLS services in the industry, which is negotiating with one of the large portals to get the best deal it can with that portal on behalf of it MLS clients. The MLS provider’s purpose is to make it possible for its many clients to “flip a switch” to take advantage of that deal. (I’ll do a post in the next couple of days explaining our role in this project in more detail, as some of you will remember my previous post about the issues associated with a firm like ours working with an entity that is sometimes on “the other side of the table from MLSs.”) Of course, even this it just a new, higher “floor” of contract terms. If your MLS works with that system provider, you will be able to adopt the agreement we negotiate with that portal quickly and easily. Or you can use it as a floor for your own negotiations with the same portal or with others.

So, despite my reservations about “model” or “form” agreements, I believe efforts by entities representing the interests of groups can bring value. Consequently, I strongly urge you to get REDPLAN’s agreement. Whether or not you are using an attorney to negotiate your agreement(s), the $500 price tag (if you are not a member of REDPLAN) is worth it to see whether the REDPLAN agreement offers some good ideas you’d like to incorporate in your agreement. Regard the REDPLAN terms only as a floor and not a ceiling. You should then engage an attorney or consultant to help you revise it, or draft a different base agreement, to meet your organization’s needs. As you go through that process, I recommend that you read Mitch’s posts on syndication strategy and on direct syndication terms.

Your thoughts?

-Brian

Disclosure/disclaimer: We do this kind of work, and this post has a self-serving angle, which could be paraphrased, “Don’t use the model agreement but instead pay us.” As all we have to sell is our advice, I can’t see any way to avoid that. Sorry. By the way, this post is not in any way intended as legal advice 🙂

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