Notorious R.O.B.

 

As a blogger, rather than a “credentialed journalist” (whatever that means), I have the freedom to just pass on rumors, as long as I label them as such. Well, consider this one of those rumors I have not confirmed yet. [UPDATE] I just got a second person to confirm the rumor. Two people saying the same thing now moves this past the realm of rumor into a confirmed report. More detail below..

I’ve heard from a reliable source earlier this evening that there are some major changes afoot at NAR. The biggest upshot of the changes is that starting in 2012, portions of the dues from NAR members will go towards supporting RPR, REALTORS Federal Credit Union, and other so-called “Second Century” Initiatives. A few minutes of Googling suggests that the original Second Century Initiatives program — which included a line item for “The creation of a national gateway for real estate information, not a national MLS” – was funded by a $16 increase in dues in 2008.

But from the start, RPR was presented as a wholly-owned for-profit business unit of NAR that would be self-sustaining, after the initial investment of roughly $25 million to buy the Cyberhomes assets from LPS and a few million for LPS data. The idea was that the data generated by RPR would be very valuable when sold to financial institutions, government agencies, and the like, and the operation would throw off enough cash not only to continue providing the system to REALTORS at no charge, but also to generate enough profit to pay back NAR.

For reference, here’s a report of a Q&A session with Dale Ross, CEO of RPR, back in March of 2010:

Why should Second Century need to be paid back?

NAR’s Second Century fund is a venture capital fund which must paid back for its investments. However, that’s not the source of RPR’s funding. RPR money comes from an NAR technology fund set up with $100 million fund (from investments); NAR’s Finance Committee stipulated that monies must be paid back to replenish fund.

Since you’re providing RPR for free, where is money coming from? What happens if your revenue models are way off?

Three scenarios: app doesn’t work, we shut down; app works and rev model works, win-win; app works but rev model off. We project we’ll need $50 million/yr to run it… if it is valuable and not generating cash, we’ll figure up another funding source. If members want it and NAR Directors decide that is best way, that could be a member dues increase. I have never seen pro formas work; I have pushed the numbers around based on a 36-month breakeven. We’ll see. (Underline added for emphasis)

Well, if the rumors that member dues will start paying for RPR starting 2012 are true, then I’m gonna take a wild stab and suggest that the 36-month pro formas were way optimistic. Since we’re looking at a dues increase in two years (launch in 2009, dues funding decision in 2011 to take place in 2012) to support RPR.

A few questions arise. The first of which is, “So uh, is this true?” I’d love for anyone who can confirm or deny the rumor. Please feel free to contact me privately via email, twitter, Facebook, phone, whatever. My contact information is on the About page. More questions follow, all of which assume this rumor of dues funding for RPR and other Second Century Initiatives is indeed true.

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[UPDATED 11/20/09: More facts added.]

Earlier this week, Reggie Nicolay (@ReggieRPR), the Director of Social Media for the REALTORS Property Resource, LLC, wrote:

I happen to agree 100%.  Also, a commenter on one of my earlier posts by the name of Kris Goodfellow wrote:

Rob,
I’ve got to say, that there is much in the way of speculation and little in the way of “facts” here. DOA, really? That’s pure conjecture. Marty got a standing O today from the 2000 leaders from every state and local associations. In the big broker’s session, the comments included “WOW!” and RPR was compared to Neil Armstrong walking on the moon.
I might be just an old fashioned, ex-newspaper journalist, but I’ve got to say that a year this post is going to look as silly as the “Dewey Defeats Truman” headline. Tell the story, man, don’t try to be a fortune teller.

So let’s say I agree with both Reggie and Kris.

My take is that you kill drama and hype by showing the facts, not by calling questions and opinions “drama and hype”.  So in the interest of moving the conversation along, and also to emphasize once again that I am no opponent of RPR, I have put together all of the facts as I know them with sources, along with questions about what we do not know.  This way, anyone who is interested might be able to discern for himself what is real and what is drama.

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Dale Ross

Dale Ross takes the podium; he’s an imposing man.

He says it took 4 months to negotiate with LPS/Cyberhomes.  There are seventeen separate agreements, which cover topics like license terms, source code ownership, and so forth.

Ross stresses that while RPR has partners, they are partners via contract rather than by having equity shares in RPR.  RPR is 100% owned by NAR.

He says NAR put in $20mm over 5 years.  The business model is data sales to government and Wall Street.  Ross says LPS came to NAR and said, “there’s a way to use derivative analytics data products”; LPS has these relationships already set up, and has a huge marketing arm.

He feels there seems to be a need in the market for RVM, a value for each of the 147mm properties in the country.

1. Take the LPS records
2. Take the MLS data, and merge it together to form RPR record
3.  Then do analytics
4.  Create derivative data product; sell that product

$250mm spent by Wall St. on real-estate related data; LPS believes that in the 4-5 yr cycle, $60-90mm market for the analytics product; split is 50/50 between LPS and RPR.

License agreements what RPR can and cannot do with the data.  Ross stresses that no raw data will be given to anyone; only custom, derivative datasets.

No fee to MLS for the public records; but there will be a fee for integration.  (Wonder what this means?  Integration of the public data will be custom by MLS?  No API access?)

Ross says RPR is NOT exclusive with LPS.  (So in theory, First American or Claritas can sell RVM or RPR data to corporate clients?  Could Altos be licensed to sell RPR data to agents and brokers?)  He notes that RPR’s license with MLS is also not exclusive.  (Hmm — what does it mean that RPR’s license with the MLS is also not exclusive?)

Ross says there will be no revenue stream back to the MLS.  The benefit to MLS is that RPR believes it can help the MLS cut some of the costs on public data.  Plus, the toolset (the website) will help MLS save money, and Ross thinks RVM will be popular with agents and appraisers

Marty Frame

Marty Frame sounds tired.  And bored.  It’s as if he’s been giving this presentation over and over and over again to dozens of people and groups.

WHOA! RPR will provide an API for VOW technology vendors.  That’s news.

Member Contacts and Networks built into RPR — why exactly is this tool here?

Expert moderated discussions???  What could Marty mean by this?  Who moderates?  Who are the experts?

Q&A

I’m not going to cover every question, or every word of the answer here.  But these are what I find interesting, and the answers I think are interesting.

Question is what is the critical mass for RPR.

Ross says rollout will be by regions.  So if California is first, then RPR will do California first.  The way he phrased it is interesting: “If REALTORS want it, then the MLS’s cooperate, then we can do California”.

They have a plan of action; they know who the largest MLS’s are; they are talking to everyone and will be contacting MLS’s with live demonstrations and how the system will work.

Question: Will a REALTOR have access to the entire country?

Ross: Yes, the whole country.  But business rules are being worked out.

NON-REALTOR members get less access.  (I didn’t know they would get ANY access.)  I guess these would be the appraisers and such?  Or simply Licensees.

Question: I should give you my Sold Data because…

Ross: It’s not for you, but for your membership.  Because RPR will give your members tools to make them better practitioners.

This tool isn’t built for you and me, but for Gen-Y; they’re entering the industry and they’re going to be consumers.  They’re used to having data, so we need to do this for them.

Question: What do people who are members of NAR (REALTORS), but not subscribers to the MLS, get?

IF you belong to NAR, but not to the MLS, then you get everything in the application, but NOT the MLS data.  They will, however, get the RVM.

So either way, even if MLS’s don’t participate,

Question: The MLS data is what drives this; but you said no revenue share for MLS.  Why is that?

(CLAPPING by audience; I think this group is more hostile to RPR than one might imagine.)

Ross says he’s willing to look at revenue share 5 years out, depending on what the revenue looks like.  I don’t think he won this audience over with that.

Marty Frame just said that RPR will do a bunch of data cleansing and data normalization on MLS data.  WOW.

Question: Can brokers opt out?  Can MLS’s opt out?

Brokers can opt out.

The MLS can opt out and terminate the license agreement if they choose.  Hmm.  I’d like to see the termination provision.

Adjustments to the system “stick” only to your individual change.

The Q&A ends.

Thoughts

That was quite a bit to try and take in.

The three or four key takeaways for me are these:

1.  RPR seems pretty deadset against revenue share.  The notion that MLS’s should cooperate even though there’s nothing in it for them, because there’s a great wonderful doodad for the membership seems… optimistic.  What’s truly amazing about this is that Dale Ross said several times that “we (RPR) can’t do it without you (MLS)”.  I have to wonder, okay… can they (MLS) do it without you (RPR)?

2.  RPR will provide a VOW API.  This strikes me as important, because it’s the first I’ve heard about a way to get data out of the system.  But at the same time, it strikes me as important because if broker/agent websites start pulling VOW data out of RPR instead of out of the MLS, that’s yet another customer touchpoint lost to the MLS.  If RPR can provide a VOW API, why couldn’t it provide an IDX API?

3.  People who are REALTORS (aka, members of NAR) but not subscribers to the MLS will get everything sans MLS data.  That means all of the public records, all the school info, all the demographic and psychographic info, etc.  Wow.  I’m trying to figure out how a smart REALTOR could leverage this to his/her benefit.  One consequence here is that companies like Onboard and eNeighborhoods simply have very little value in the post-RPR world.

4.  This group, the MLS executives, appeared to me to be largely hostile and at best skeptical.  If RPR really wants to launch this by April 1st of 2010, Marty and his team have their work cut out for them.  The civil war I predicted isn’t quite civil war… but this has the smell of the Missouri Compromise era.

-rsh