MLS Town: Raising Speed Limits and Tolling Roads (LEAP Part 2)

 – For Part 1 of this discussion, see Six Questions on Brokers’ MLS Data (LEAP Part 1) –

The conversation about giving brokers a single efficient process for working with MLS data (LEAP Policy) continues to heat up. Michael Wurzer has been penning some thoughtful ideas about the value of MLS data and business models to capture that value. I’ve asked 6 questions which the industry must answer to move this data efficiency model forward.

Note: Michael is CEO of FBS as well as Vice-Chair of RESO and one of the industry’s brightest lights. It goes without saying that these are personal opinions, not RESO positions.

Michael and I had a chance to chat with Greg Robertson on the Listing Bits podcast this week and it really fleshed out where the ideas we have been sharing have some commonality. It’s worth starting there:

  • Aggregated MLS data’s value is more than the sum of its parts. Participants should benefit from the additional value created via the combined data set.
  • Competition is as important as cooperation. Free market competition that resides upon a cooperative foundation of the MLS has created the most efficient real estate marketplace in the world.
  • Some brokers have long complained that the MLS is giving their data away. Threats of varying specificity about backing away from cooperation reinforce the need to protect the value of the data.
  • The current state of MLS data access and usage for brokers is a quagmire. It’s unnecessarily so.
  • The current draft of the LEAP proposal needs more fleshing out of details for usage rules. That needs focus ASAP.

That’s a lot in common. While what Michael and I have been writing about in recent posts may appear to be in direct conflict (some of it is), the goal is the same: ensure the viability and strength of the MLS. That means ensuring the viability and strength of brokers, the creators and lifeblood of the MLS broker cooperative.

Policy, Rules, and Licenses

Michael believes that a good licensing scheme will solve most of the brokers’ problems. I’ve said that good licensing flows from good policy which must come first. Maybe there’s some inconsistent terminology that makes these positions appear further apart than they are. What I know, is as long as we think in terms of IDX, VOW, and BBO at our highest levels of rule development, we will continue to create not only data silos but process and technical silos for brokers.

Policy, followed by more specific rules, allows for comprehensive license guidance that creates consistency and certainty for brokers and technology vendors. If rules aren’t created with the multi-MLS broker in mind, they’re tone deaf. Good technology goes to die in disjointed, custom rules sets for something as straightforward as displaying a real estate listing. You can’t use a local license to erase 600 different requirements for font sizes and the positioning of a brokerage name around a listing photo.

On Money

The basis of Michael’s argument for a real estate data Pay-Per-View licensing model (my term, not his) is that the MLS data has significant value and some organizations are leveraging it for more profits than others. One business model, like an aggregator advertising portal, might make most of its money from derivatives or display of the MLS data, while another broker might supply most of the listings but make almost no money through data display.

There’s no doubt that there’s a revenue opportunity in charging for data based on total usage. It’s a sea change in philosophy compared to how MLSs treat data today. Brokers traditionally created MLSs and MLS services to raise the foundation of their collective businesses but not to differentiate services based on business models. Yet MLSs are now creating tiered service levels for power users vs light users of other MLS services. And there’s very little that’s traditional about the current brokerage data atmosphere.

This is a conversation for each MLS to have with its participant brokers. (Note added: Any pricing scheme should be designed with pro-competitive principles in mind and not with the intention of creating a barrier to entry.)

The Town of MLS

LEAP policy and Pay-Per-View licensing are two very different ideas being presented. They could work together. Or they could be completely separated. Here’s how I described it on Listing Bits:

You’ve got a bunch of people (brokers) who came together and said, let’s form our own town with our own government: for the people, by the people. We’ll cooperate with each other through laws agreed upon by our community: MLS Town.

So they collected taxes, built dirt roads, and put up 10 MPH restrictions on them. Residents clunked along in Model T Fords. It worked.

But they moved on to gravel roads, and then paved roads with safety markings. They got newer cars with more safety features and greater reliability. They’d been driving long enough in new cars on new roads that it became abundantly clear that they could loosen the old rules and things would still be OK.

So they asked the town government to raise the speed limit to 25 MPH. But the officials said, “They’re already getting to where they need to go. What problem are they trying to solve?”

And then a different idea came up: “There are new people moving into town with more cars and faster cars. They derive more value from the roads and put more wear on them. So let’s toll the roads. The biggest users of the roads will pay the most. We can generate more revenue for future development of better roads.”

It was worth consideration, but it would take some time to gather feedback and decide on whether it was a good idea.

Meanwhile, the original requestors asked again,

Whether or not we toll the roads: can’t we at least all agree that we need to raise the speed limits now? There’s no cost. And if those future roads still have 10 MPH speed limits, have we solved our original problem? This shouldn’t get held up in a debate over tolls. You can always change your pricing scheme later.

Let’s stay focused on the drivers

That seems to be where the industry conversation stands today. We need to remove the archaic friction of current national policy and see what additional national rules and licensing guidance might add to a widely supported solution. Local MLSs will make pricing decisions where, by and large, national policy will be silent.

There’s a massive amount of value in LEAP’s foundation. It needs industry input into detailed rules NOW. A complementary comprehensive model license could help reduce the current state of different-as-a-default at the local level. We could just call up Mitch Skinner to genericize a current four-part license into non-IDX/VOW/NAR policy language.

So let’s get down to business: policy, rules, licensing guidance, and then local decisions about pricing can commence. The brokers are still driving 10 MPH and they are, understandably, growing impatient.

Next Steps:

  1. Answer the questions about the current LEAP draft policy.
  2. Ensure that important established usage rules make it into the LEAP proposed rules.
  3. Establish a viable technical solution for multi-usage designations in a data set (see RESO R&D meeting and business case, Transport Workgroup’s discussion of Field Metadata Resource, RESO Broker Advisory Facebook Group conversation).
  4. Publicly engage all stakeholders in an FAQ-before-implementation process (venue TBD).

Author

  • All opinions expressed herein are personal opinions and do not constitute the position or views of any organization. Sam DeBord is CEO of Real Estate Standards Organization (RESO). He has two decades of experience in the real estate industry, spanning real estate brokerages, mortgage lending, and technology consulting. He has served as President’s Liaison for MLS and Data Management with the National Association of REALTORS®, a REACH mentor, and on the board of directors for NAR, Second Century Ventures, and California Regional MLS. Sam began his career as a management consultant for PricewaterhouseCoopers. He is a recognized real estate industry writer for publications including REALTOR® Magazine, Inman News, and the Axiom Business Books Award-Winning Swanepoel Trends Report.

1 thought on “MLS Town: Raising Speed Limits and Tolling Roads (LEAP Part 2)

  1. Sam DeBord

    Our old Disqus commenting platform now includes trashy ads, so I’ve switched back to Jetpack and recreated some comments:

    Michael Wurzer:

    Sam, I agree there’s a lot of common ground, so thank you for outlining those areas. Where I think there’s the most agreement is that right now, this moment, is a critical time for action and improving the terms and processes for licensing MLS content. These moments do not come along every day, so we should all seize the moment for action and make the most of it to create improvements for everyone.

    The source of the biggest conflict is in the central premise of LEAP, which is that all the use cases (IDX, VOW, back office, derivative works, etc.) are the same, when they are not. This is an error that, until corrected, should doom the initiative. I want to be more sanguine and buy into your small town analogy where increasing the speed limit will be just fine, but the problem is that LEAP essentially says, yeah, we don’t care if you’re riding a bike, driving a monster truck, or flying a rocket ship, let’s just license them all the same even though they’re not.

    Instead of this, let’s do the work to understand the different uses for this valuable data so we can make sure we don’t put in place a policy that ignores those fundamental differences. Regarding usage-based licensing, I chose that license term as one example of an important term that would be different for different use cases, but there are many others, too. In fact, license agreements should hold together the terms as a system, where they support each other. This isn’t radical thinking. Every other business with a valuable asset would START by figuring out the pricing term for the license agreement. Pricing isn’t something you tack on later, it’s the foundation for every other term in the license agreement.

    For example, let’s say a data consumer wants to add on the right to use the data for preparing derivative works from the data or persist the data in their own repository in perpetuity. Negotiating such an agreement or license term certainly is possible but it should cost more or there should be some other trade-off to make giving that right a good decision. However, if we don’t recognize these trade-offs from the beginning, and choose instead to lump them altogether, then there’s no way to create an effective license agreement.

    The language that’s problematic in LEAP is this sentence, “MLSs may not impose any limitations, restrictions or conditions on the use or display of the MLS listing content other than as specified in this policy.” I propose instead, “LEAP recognizes that the MLS data is uniquely valuable for a variety of uses by Participants and that MLSs should create license terms to reflect and protect that value. Nothing in LEAP should be interpreted to prevent MLSs from creating or requiring licensing terms or agreements specific to each use case. Instead, LEAP simply requires that such terms be presented in a single agreement to simplify the licensing process.”

    Sam DeBord:

    I haven’t seen anyone say that all use cases are the same. The lack of defining language in the draft does make that conclusion reasonable at this intermediate stage, though.

    We will need to get more specific in the usage details. But we also shouldn’t assume that every MLS will want to create a variable pricing scheme. That’s a big question mark.

    So we define the usage criteria. And we recognize that the overwhelming licensing model for participants in MLSs right now is a no-cost license (aside from membership dues). Are there rules that don’t exist yet in an MLS Grid VOW-type license today that must be instituted to support a scaled usage cost model? We need to know what they are. There are some very concrete items to work out without dooming any initiatives.

    Let’s start with well understood concepts and adapt to LEAP:
    MLS Grid Rules and License: https://www.mlsgrid.com/resources

    —-

    Michael Wurzer:

    Sam, am I reading this comment correctly that what you’re proposing for LEAP is to adopt the MLS Grid License and Rules nationally? LEAP currently doesn’t say that and, in fact, as mentioned in my earlier comment, the blanket prohibition in LEAP likely would prohibit many of the provisions in the MLS Grid license. What would be great is if there was a draft somewhere that everyone could see the current state of the proposal and add comments or questions.

    By way of example, Section V.f.viii of the MLS Grid license prohibiting creation of derivative works would be prohibited by LEAP as currently drafted with the general prohibition against use not specified in the policy. As I’ve mentioned, this provision from the MLS Grid license dealing with derivative works is really important and yet LEAP would prevent this protection.

    Sam DeBord:

    You’re right that this needs to be a single shared, public document where motivated stakeholders can comment and suggest changes.

    Because this one clause in the draft is the primary focus of the conversation, let’s play out what it could look like. Your statement above, without the value attribution, could be simplified and added to the clause.

    So with the additional licensing verbiage, can the original intent of the clause survive? MLS Grid’s rules may not fit the new scenario 1-to-1 exactly, but I’m sure that most of it will apply with some massaging of the legacy policy terminology.

    If every relevant concept in MLS Grid’s rules were effectively incorporated into the LEAP rules that accompany the LEAP policy, maybe we could we say something like, “MLSs may not impose any restrictions on the use or display of the MLS listing content other than as specified in LEAP policy, LEAP rules, and a single MLS agreement for LEAP data recipients that can include provisions for licensing data for designated uses and establishing definitions, obligations, indemnifications, and other items necessary for a license.”

    I won’t over-lawyer this (you could) but I believe this was the vision of the clause, even if the rules haven’t been incorporated yet. I’ll probably just document all of the rules concepts we’d expect to see in a VOW and/or back office/valuation data set and share them in a doc at this point so we can keep the conversation moving.

    Reply

Discuss!