Without a doubt, the topic of conversation at this year’s NAR National Convention has been the REALTOR Property Resource (Link: PDF) or RPR, the ambitious $20mm program rolled out with much fanfare by NAR. You couldn’t avoid talking about RPR even if you tried. And I wasn’t really trying that hard, because RPR is a fascinating product, an awesome user interface, and one where the team led by Marty Frame deserves a whole lot of credit for pulling such a great product together in such a short period of time (roughly 4 months). Despite my concerns that RPR will trigger a civil war in the real estate industry, I thought (and continue to think) very highly of RPR.
However, it is now time to bury RPR. It is dead on arrival in its current incarnation.
Having presented at, and then having sat through the presentation of Dale Ross and Marty Frame on RPR, at the MLS Executives Meeting at NAR yesterday, I believe that the general mood of the MLS operators ranges between open hostility to cautious neutrality. The larger MLS’s are biding their time, to see what some of the details are, possibly to see what is being offered by RPR for early adopters. (Full disclosure: a large MLS, MRIS, is a client of 7DS, but I am writing this post, as I have every post on this topic, based on what I personally saw and heard, and public information, as opposed to anything discussed with them.) The smaller MLS’s are worried what RPR could mean for them, and miffed that there is no revenue sharing arrangement for the sale of “their” data.
Brokerages are not bursting over with enthusiasm either. They also wonder what’s in RPR for them, since they feel that the data that the MLS is supposed to provide RPR belongs to them. The broker-owned MLS’s can’t make a decision without getting their shareholders on board, and the mood appears dark, to say the least.
The fatal flaw of RPR, I think, is the lack of revenue share. Brokers, MLS executives, and Association executives might all look with favor or at least interest on a proposal that promised revenue streams that would allow them all to either make greater profits, or reduce the cost of service to their members. Dale Ross made it crystal clear to the MLS executives that there is no revenue share for them; he urged them, in fact, to cooperate and collaborate with RPR for the good of the members because RPR will provide tools to help the members of MLS’s become better practitioners. Ross’s concession that maybe five years down the line, after RPR’s revenues and profits are stabilized, he may consider revenue share did not, it seemed to me, to go over all that well with the audience.
Trouble is, those types of answers do not appear to assuage the suspicion on the part of MLS executives and brokerages that what NAR intends to do with RPR is to create a national MLS.
Into this environment of suspicion comes a critical piece of information.
The Bullet to the Brain
The coup de grace for RPR, and why I am ready to announce it dead on arrival, is two pieces of news.
First, LPS is not prohibited from doing business directly with MLS’s, or indeed, with brokerages.
I spent an hour or so with Prem Luthra, the Chief Strategy and Sales Officer for LPS Real Estate Group, last night and had a great, wide-ranging conversation. I learned a good deal of information on background as to the history of LPSREG, of LPS, of their motivations, of their strategies, and so on. And Prem is a really good guy, a true professional, who is a credit to his company and to the industry. So it was a great talk.
I did learn a few things that are relevant to the RPR discussion.
1. LPS granted fairly broad rights to RPR for the public data it licensed to RPR. However, the critical limit is that there is NO consumer facing usage allowed. And the partnership between RPR and LPS contemplates a level of policing/compliance on the part of RPR users. Prem allowed that REALTORS tend to be, as a group, extremely… ah… innovative in how they get around such limitations, but felt they could figure out what to do and how to respond on a case-by-case basis. For example, if a RPR user were to go into the system, print out a PDF report for every single neighborhood in the state of California and put them all on his public facing website… what would happen? The answer is unclear, but that would likely be a violation of the license; enforcement will be tricky. One of the results may be that participating MLS’s may take on policing responsibilities as to its member activities which they may or may not be able (or willing) to take on.
2. LPS Real Estate Group will sell RPR-derived products to the real estate industry. Prem noted that what those products are or might be is unknown, but the business model for RPR is not limited to simply selling derivative data products to banks and financial institutions. So for example, one might imagine a RVM (REALTOR Valuation Model) widget for public-facing websites that LPS will sell to brokers and agents. Interestingly enough, the revenue share percentages on those products may or may not be the same 50/50 split that Dale Ross has mentioned for government and Wall Street data sales.
3. There is no exclusivity in the agreement between LPS and RPR; Dale Ross also mentioned this during the MLS Executives session, and suggested that if LPS isn’t living up to its part of the bargain, RPR might find someone else to step in. But that lack of exclusivity goes both ways: LPS is not prohibited from working directly with MLS’s or brokerages who opt out of working with RPR.
To be fair, Prem stressed that LPS is 100% committed to seeing RPR be successful, and that he believed that once things settle down from the initial shock, the industry would get behind RPR. And the team at LPS is busy promoting RPR, from all appearances.
On further digging, however, he allowed that IF an MLS has made a final decision to opt-out of participation with RPR, and IF that MLS wanted to explore options for monetizing its data, then LPS is not barred from working with that MLS. What is not clear is how much, if any, of the Cyberhomes assets (which went into the awesome user interface for RPR) are retained by LPS. Based on what I’ve heard at REBC San Diego, it appeared that NAR bought all of the code and intellectual property behind the user interface — but not having seen the agreement, it may be that LPS retained some sort of co-ownership rights.
What is clear, however, is that the Data Analytics Group did not get sold to NAR along with Cyberhomes. This is the group of “propellerheads” — data analysts, statisticians, economists, etc. — who work for LPS creating data products (normally from the mortgage and title data it processes for banks and institutions). They remain at LPS, and these are the folks who are experts in data analysis, data productization, and derivative data.
Prem further allowed that First American, the main competitor to LPS, also has capabilities in data processing, data analytics, and in institutional sales into government and financial institutions.
The second piece of information, from a reliable source, is that Move retained some or all of the intellectual property to their version of RPR which they developed for NAR on a “work-for-hire” basis. With NAR having terminated that relationship, to go with LPS/Cyberhomes, Move is completely in the clear in introducing a competitive product to the market. Not having seen Move’s version of the toolset, and not having seen what their possible model could be, it is unknown what Move’s… ah… next move will be.
But it seems wholly illogical to assume that Move would simply lay down and accept defeat. It is far more likely that Move has been working on some sort of an alternative solution to RPR for the past four months since learning that they are going to be cut loose.
Don’t Fear the RPR
Brian Boero of 1000watt Consulting amusingly referred to RPR as “the Reaper”. Well, based on the above, I’m with the Blue Oyster Cult in saying, Don’t Fear the RPR, for it is dead on arrival.
First, Dale Ross mentioned several times during his presentation to the MLS Executives that RPR could not work without cooperation from the MLS’s. “We can’t do this without you” was the message. What he did not ask is whether the MLS could do this without RPR. That question has been answered: the MLS can.
The foundation of the LPS-RPR deal is twofold: one, that LPS provides data analytics expertise with which the raw data from MLS can be combined with public data to create data products, and two, that LPS provides sales and marketing channels. Both of them are retained by LPS, and crucially, LPS can provide both of these services to MLS’s directly.
The likely result of such collaboration, then, especially with the RPR deal as the template, is that the revenue share from such data sales and data productization will go to the participating MLS rather than to RPR. With the dollar figures that have been thrown around so far, it seems extremely unlikely that any MLS will forego potential millions in revenues by working directly with LPS in order to collaborate with RPR.
Second, the only piece that RPR brings to the table, then, is the user interface — which, admittedly, is extraordinary. But Move retained the intellectual property rights to its version. It seems unlikely that they would just let such an asset lie fallow.
Combine the two and the incentive to opt out of participating with RPR becomes insurmountable. On the one hand, the MLS can cooperate with RPR, get a very nice UI (which may or may not make the MLS itself irrelevant), and get no money. On the other hand, the MLS can opt out, work directly with LPS (or First American), get a UI of unknown quality from Move, and get a revenue stream from data sales. That, my friends, is what we strategy consulting professionals call a no-brainer.
At this point, any MLS executive who agrees to collaborate with RPR is likely in danger of getting fired at the next opportunity by his/her Board of Directors.
There are still open questions and issues.
What’s next for NAR/RPR? Do they proceed with the current incarnation of RPR, even in the face of all-but-certain failure? Or do they reinvent RPR quickly?
Where is First American in all of this? It seems odd to me that we haven’t heard from them, but they may be the biggest winners from all of this.
What does Move actually have with their user interface? Was it really that horrible that NAR terminated the agreement rather than try to improve it?
Where do all of the MLS tech vendors stand? Are they favorably inclined towards RPR, or are they scared shitless by it?
Even after the funeral for RPR, questions will remain. The effects will reverberate throughout the real estate industry for some time to come.