Sting still makes $2,000 dollars every single day because decades ago he wrote the song; “Every Breath You Take”. Don McLean stunningly still makes $300K every year for the 20 minutes he spent writing “American Pie” 50 years ago! This of course is nuts. It’s also why things change.
Music publishing has nothing to do with real estate. But, because of some eerie industry similarities, the music industry does serve as a roadmap for what can happen. The music industry was forced to react and adapt to radical change in order to ensure it’s long-term survival. The real estate industry on the other hand, continues to preach dogma and fight even the slightest change. Want to guess who wins?
The record industry was once dominated by the major Labels. Money called the shots and the artists were their extras. As artists grew in popularity, so did their power. In less than a generation, artists went from no voice to suddenly being in control. From little to no money to bathing in cash. But, royalty battles did nothing for the consumer. As technology advanced, consumers unhappy at the increasing cost of music simply revolted. If you don’t take care of the consumer, they will figure out a way to simply bypass you. This of course created the need for another industry course correction. The consumer was now in charge of the music industry.
Franchises once dominated the real estate industry. Agents didn’t really matter, it was all about the national numbers. Affiliate as many agents as possible and home sales will be inevitable. Both the agent and the artist felt used, taken advance of and ripped off. But, within a decade the artist flipped the script in their favor only to have the Consumer flip on them a decade later.
The real estate agent hasn’t fared as well. In the 50 years since the onset of the national franchise, agents have gone from paying Broker commission splits of 25% to paying Broker commission splits of 15%. Whoa, slow down! The consumer, for the most part, is STILL paying 6% commission. Fifty years of progress? I am not kidding, that’s what NAR calls it!
Early on the music industry realized they couldn’t hide behind technology as an excuse for their percentages. It’s true, the recording companies did have huge investments in the cost of early studios. But, in the bigger picture, it really didn’t take long before that technology was at everyone’s fingertips.
Franchise Brokers used to justify their 6% commission because they had to purchase banks of computers, at $5K a pop, so their agents could sign up for “computer time”. Yeah, well that was 25 years ago. Paying $5K for a computer is very much a distant memory, so why isn’t the 6% commission?
To the real estate industry, FSBOs are an annoyance. A small sub-set of outliers who will never really amount to much. The music industry used to think the Napster types would go away as well. And because they didn’t go away, their revolt against the industry was successful. The consumer now dictates how they will listen and pay for music. It’s on their terms.
Make no mistake, as far as the agent is concerned, I wish the 6% commission could stay forever. But I am also compelled to represent those who are paying for all this. There used to be a time, I really didn’t have much sympathy for the costs millionaires paid for selling their mansions. But today, million-dollar price tags are commonplace. Today’s buyer of the million-dollar home isn’t that rare or unique, they’re just employed. How long before Mr. Everyman tires of paying over $60K to have people purchase their home?
Will the consumer revolt happen in NY, Chicago or LA? No. The consumer revolt can only happen in markets that will allow it. In other words, markets NOT owned and controlled by NAR. Or, more simply said, Atlanta. Everyone working here needs to be acutely aware of how vulnerable our market can be. A revolt can happen here. The consumer can take charge.
Throughout the month of May, Wynd Realty is asking its Agent Community what they would do in the event the 6% standard goes away. Our June 1st blog will attempt to summarize those discussions.
Ignoring the inevitable doesn’t make a lot of sense. But, being prepared for what may come, does.
BTW—Those teenagers who forever changed the music industry with their “share” rebellion? Same people who are now buying and selling million-dollar homes.