RPR: A year (or so) later

A couple hundred MLSs have signed agreements to license data to RPR in the last 18 months. Some of those agreements have already “auto-renewed” for their second year, and many others are yet to do so. MLSs have to decide whether to allow the auto-renewal, to terminate the relationship, or to seek revisions to it. This post discusses some strategic and practical concerns on that front.

First, you should understand the contract. Unless your legal counsel modified it for you or you negotiated other terms, Section 10(a) of RPR’s current standard agreement provides that the agreement has a term of one year, but that it automatically renews for successive one-year terms unless either party gives the other notice of termination 90 days or more before the end of the current term. Thus, if your agreement was effective December 1, 2010, you must decide whether to allow it to renew before September 1.

Second, you should recognize this as a strategic issue. Our fried Mike Audet at WAVGroup has offered a very thoughtful and smart summary of the issues in a blog post. Our post will look in more detail at the analysis for the RPR agreement.

Factors for deciding whether to continue the agreement

There are three factors you should consider when deciding whether and how to allow the RPR agreement to continue. Understand first that the essence of the bargain with RPR is supposed to be quite simple: RPR gets data from your MLS to license into analytical products in the real estate vertical; in return, your MLS gets its data layered into the RPR tool for brokers/agents, in theory making the RPR web site a much more valuable tool for your REALTOR® subscribers. Based on that, the three questions you should be asking now are:

1. What benefit is RPR getting from our MLS’s data?
2. What benefit are our subscribers getting from RPR?
3. What is our opportunity cost for licensing data to RPR?

You have or can get the data needed to make these assessments. First, to evaluate what use RPR is making of your data, you can review a report provided by RPR of the folks to whom RPR is licensing products containing your MLS’s data. RPR’s current contract says this: “RPR shall make available to Provider a list of all current RPR Customers within five (5) business days after the last day of each financial quarter following the Effective Date” (Section 1(t)). Second, to evaluate your subscribers’ use of RPR, you just need to request a usage report from RPR. RPR is not required to provide this under the license agreement unless you negotiated this term in, but I expect if you ask nicely, RPR would provide it. Be sure to ask for a detailed log, so you can see which MLS subscribers are using RPR, not just how many. Finally, to evaluate the opportunity cost of licensing data to RPR, consider what you would have made if your MLS had entered an exclusive license with CoreLogic to license data instead. You can find that out by getting an estimate from CoreLogic and then asking other MLSs to comment on the accuracy of CoreLogic’s estimates.

First off, when evaluating RPR’s use of your MLS’s data, you should expect and hope that RPR will make money with it. If it does not, either (a) RPR will go out of business, denying your subscribers the use of the dandy RPR web site and tools, or (b) NAR will have to add the cost of it to member dues to keep it going. If RPR has not started making money, you should ask yourself, “When will it?” NAR cannot afford to sink unlimited funds into RPR, so it needs to start making money to be a reliable business partner to MLS. If RPR is making money, you should ask yourself whether the amount of money it is making is commensurate with the value your members are deriving from RPR. Of course, you will not know whether RPR is making money just by looking at its list of current licensing customers, but you should be able to form a reasonable judgment about its prospects based on that data.

As you consider the value of the RPR tools to your subscribers, you should be able to review data available from RPR to tell how many and which of your subscribers are using RPR and how often they are using it. You should not expect big numbers. I’d be impressed if RPR could sustain 10% of your subscribers as regular users. Most agents just don’t like to use new stuff. If you have big numbers of subscribers using RPR regularly, that’s great: consider whether you think the utility is worth what you are “paying” (i.e., use of MLS’s data).

If only a small number of your MLS’s subscribers are using RPR, that’s not necessarily RPR’s fault. Ask yourself: How long ago did you launch it to your participants/subscribers? How much have you marketed it? You can’t expect RPR to be a success just by being a good product. It needs continuous promotion and (at least moral) support from your organization to be a success.

Finally, consider the opportunity costs. Your MLS could be licensing data through other channels that deliver revenues. You can license data to CoreLogic even if you are licensing data to RPR, but if you sign an exclusive license agreement with CoreLogic, you get to keep a much higher percentage of licensing revenues. What difference would that revenue make to your MLS? Could you use that money to provide services to your subscribers that would be better-used or better-received by subscribers than RPR? If so, maybe the RPR relationship is not meeting your needs.

Deciding what to do

Based on the data derived from the processes above, you should decide whether to take one of these actions:

1. If you feel the value exchanged is reasonable, continue the contract as-is. No action is required. BTW, I don’t recommend this if you did not have counsel help you with the first version; there are several things we recommend changing in their base agreement.
2. If you feel adoption is low but that you could help remedy that, promote the RPR toolset to your subscribers better in order to increase adoption and use. No action required with RPR, but local action is required to promote.
3. Terminate the RPR agreement if you feel that adoption is not sufficient to warrant the use of the MLS data in RPR’s applications; or that RPR’s “compensation” of MLS for that use is insufficient; or that the opportunity costs are too high (i.e., you can get a better deal elsewhere).
4. Propose a revised agreement with RPR that addresses any shortcomings in the current relationship. Contact RPR and work with your counsel.

You should be strategic about the decision. So, for example, if your MLS originally just signed with RPR for political reasons (“My MLS president wants to be a committee chair at NAR and feels she needs to ‘deliver our market to RPR.’”), you may be able to terminate the agreement now if the service is not working out. Or if you believe that RPR may strategically strengthen NAR in a way you find distressing, you can keep the agreement in place but just focus your promotion efforts on your own developments and projects.

Did I leave anything out?
-Brian