4/26/10 SEE IMPORTANT UPDATES BELOW (Based on follow up email we received from RPR today. Look for additions and
For the last two months, MLS execs and brokers have frequently asked me, “What about RPR: Would you license data to them?” And always, my answer is the same (and probably disappointing to my interlocutors): “It would depend on what strategic objectives I was trying achieve.”
It seems to me that most folks are not breaking down the RPR proposal to answer the first two essential questions about any business deal: “What are we giving up?” and “What are we getting in return?” Because MLSs have limited time to develop lines of business and make deals, I would immediately add a third question: “Is what we are getting of strategic importance to our organization?” MLSs should not spend time on business deals unless it calculates those deals to achieve strategic objectives.
Many MLSs have said, “If RPR will not revenue share, we won’t license to them.” This strikes me as odd. MLSs have had the option of licensing MLS data for commercial purposes for years. Some MLSs have engaged in it on limited, others on wide-spread, bases. But is making money from the MLS data really a strategic objective of most MLS organizations? Well, it could be. But MLSs have often been reluctant to license MLS data in exchange for money for several reasons:
- It has been unpopular with listing brokers, whose consent it generally requires. They want to know where the money will go, and how much of it they will get. In other words, the brokers are unsure what they are getting for their data.
- When those asking for MLS data explain the products in which they want to use the data, they don’t make it very clear how the data will be used. In other words, it’s unclear what they are asking the MLS to give up – what MLS will permit as part of the deal that MLS did not previously permit – so brokers and MLSs are unsure what they are giving up for the money.
- The unforeseen consequences of including MLS data in third-party products are, well… unforeseen. Again, this casts doubt on what the MLSs are giving up for the money.
- And it’s not really worth it for MLSs to deal with the uncertainty in these first three points for a little cash; in most cases, if the MLS really needs money, it raises fees. (Not popular, I know, but it’s easier to explain that value proposition to the brokers.) In other words, small amounts of money are not of strategic importance.
RPR’s strategic proposition
Let’s look quickly at what MLSs that license to RPR get and give up and consider how to evaluate that bargain from a strategic standpoint.
What MLSs get
If an MLS licenses data to RPR, RPR claims it will get the following benefits:
- RPR will be a much more valuable tool for the MLS’s REALTOR® subscribers. That’s because RPR without MLS data is much less useful than RPR with MLS data. Remember, though, that every REALTOR® will already have access to RPR whether her MLS licenses data to RPR or not.
RPR will be available to the MLS’s non-REALTOR® subscribers. Because they are not REALTORS®, they would not otherwise be entitled to access RPR at all. This is important if many of your MLS’s subscribers are non-REALTORS®.RPR previously said that MLS subscribers of licensing MLSs who are not REALTORS® would be able to use RPR. RPR has changed this position, and now only REALTORS® will have access to RPR.
- All the MLS’s subscribers will benefit from the exposure of their active listings to other broker/agent users of RPR all over the country. (Realtor.com pretty much already provides this advantage, but perhaps RPR does it in a better context.) Your MLS gets to decide which other MLSs’ subscribers get to see your MLS’s active listings; RPR says it’s finding that most MLSs “want to share actives with everyone,” which makes sense to us in light of the Realtor.com comment.
- If the MLS consents, other listing statuses would be available on RPR to subscribers of other MLSs that permit such access. In effect, RPR could serve as an MLS data-sharing platform between neighboring MLSs. There would be no offer of compensation, and probably not IDX sharing, etc., but a broker subscribing to MLS A could use RPR and data from MLS B to prepare a CMA or other broker service based upon the data of MLS B that are sharing.
- RPR and NAR contend that having MLS data in RPR products will result in the real estate market being much more liquid. This theoretical argument might benefit from further discussion in another post (comment if you want me to take this up on the blog).
- (Am I missing anything?)
What MLSs give up
- Basically, MLS allows RPR to use the listing data in a wide range of data products. This is a troubling item, because the uses RPR may make of the MLS data are ill-defined in its contract and communications. (RPR maintains that it has “been explicit in defining the products which will use the MLS data, the RVM and Match and Append.” That’s good news; but in our opinion it’s not what’s currently in the RPR contract. That’s an easy problem to solve: We just revise the language of the contract to be consistent with what RPR says it will do.)
- Assuming that RPR is a success with brokers, and assuming the MLS perceives NAR/RPR as a competitive threat, MLS is giving RPR a relationship with the MLS subscribers and permitting it to study their behavior on RPR – two things that could be very valuable to NAR if the fears of it attempting to ‘nationalize’ MLS ever materialize. I’m skeptical that NAR could stage a meaningful ‘hostile takeover’ of the local MLS role – but I’ve been accused of being naïve before.
- (Am I missing anything?)
How to evaluate the exchange
Balancing these two categories – what the MLS gets vs. what it gives up – is no easy task in this case. It’s not a task for the MLS CEO or staff alone, because it is essentially strategic in nature. Strategy is why your MLS has a board of directors made up of market participants.
So, if I were the CEO of an MLS, I might advise my board to use this process:
- Get the directors to acquaint themselves with RPR by visiting the demo on RPR’s site. They should be thinking about how valuable the RPR tools would be to them as practitioners. I think it’s useful for them to do this alone the first time. It forces them to formulate their own thoughts before getting together with others. If a board member is a broker that does not actually use MLS systems, have her assign a couple high-producing agents in her office (or their assistants) to do this evaluation.
- Gather the directors to have a ‘guided tour’ of RPR – probably with an RPR representative present either physically or via webinar. The goal of this session should be to (a) encourage the directors to discuss their ideas about the value of RPR with each other; (b) ensure the directors understand exactly what features of RPR would be available only if MLS licenses data to RPR. This last bit is really important: Remember, much of the RPR system is available to all REALTORS® free of charge, whether your MLS provides data to RPR or not. The addition of MLS data to RPR, not RPR itself, is what your brokers get from the MLS licensing data to RPR.
- In a second session, lead the directors in a discussion of the strategic value they place on the things that the MLS gets if it licenses data. Review the five items in the “What MLSs Get” category. The directors should articulate how those values fit in your organization’s strategy. The directors and management together should decide how they will measure whether the MLS is actually receiving that strategic value.
- Now, assume for a moment that you can address the concerns raised in “What MLSs Give Up,” is the bargain interesting to the board on a strategic level? If the answer is ‘yes,’ start talking about specific ways to address the concerns raised in “What MLSs Give Up,” and work through them with RPR. If the answer is ‘no,’ give data licensing to RPR a pass for now.
- Finally, if you’ve decided to proceed with data licensing to RPR, get into the weeds of contract negotiations with them. A first step might be to have a conversation with RPR about exactly what kinds of data uses RPR intends to pursue and whether your MLS can incorporate a narrower definition in the contract with RPR.
I would not consider involving my attorney until step 4 or 5, though I’d want to include any trusted consultant I intend to use for the project starting at step 2.
Has your MLS made a decision about licensing data to RPR? Are you happy with the process it used? Do you have thoughts about the (im)practicality of what I’ve proposed here?
(Full disclosure: Our firm is working on a consulting project with Focus Forward Consulting (Kevin McQueen) for NAR that does not relate to RPR.)