.music update: I’m calling it for Costa

Amazon has pulled out of the fight for the .music gTLD, and I’m ready to call the race.
In full knowledge that this could be my “Dewey Defeats Truman” moment, it seems to me the balance of evidence right now is strongly pointing to a win for DotMusic over sole remaining rival bidder MMX.
The contention set originally had eight applicants, but six — Google, Donuts, Radix, Far Further, Domain Venture Partners and last night Amazon — have withdrawn over the last week or so.
This is a sure sign that the battle is over, and that the rights to .music have been auctioned off.
The two remaining applicants yet to withdraw are DotMusic Ltd, the Cyprus-based company founded and managed by music enthusiast and entrepreneur Constantinos Roussos, and Entertainment Names Inc, a joint venture managed by MMX (aka Minds + Machines).
One of them will withdraw its application soon, and my money’s on MMX.
Neither company will talk to me about the result.
But, as I observed Monday, DotMusic has recently substantially revamped its web site, and appears to be accepting “pre-registrations” for .music domains. These are not the actions of a loser.
MMX, on the other hand, has never shared Roussos’ public enthusiasm for .music and has never been particularly enthusiastic about winning private gTLD auctions, usually preferring instead to enjoy the proceeds of losing.
There are only two wildcard factors at play here that may soon make me look foolish.
First, the joint venture partner for Entertainment Names is an unknown quantity. Its two directors, listed in its .music application, are a pair of Hollywood entertainment lawyers with no previous strong connection to the ICANN ecosystem. I’ve no idea what their agenda is.
Second, MMX did not mention .music once in the “Post Period Highlights” of its recently filed 2018 financial results statement. It did mention the resolution of the .gay and .cpa contention sets, but not .music.
That filing came out April 3, at least a few days after the contention set had been won, but I’m assuming that the tight timing and/or non-disclosure agreements are probably to blame for the lack of a mention for .music.
So, on balance, I’m calling it for Roussos.
With a bit of luck we’ll have confirmation and maybe a bit of detail about potential launch dates before the week is out.

Did Roussos pull off the impossible? Google, Donuts, Radix all drop out of .music race

Google won’t be the registry for the .music gTLD.
The company, along with pure-play registries Donuts and Radix, late last week withdrew their respective applications from the .music contention set, leaving just three possible winners in the running.
Those are Amazon, MMX, and DotMusic, the company run by long-time .music fanboy Constantinos Roussos.
As I blogged last week, applications from Domain Venture Partners and Far Further have also been withdrawn.
I suspect, but do not know for a fact, that the contention was settled with a private deal, likely an auction, recently.
The logical guess for a winner would be Amazon, if only because of the nexus of its business to the music industry and the amount of money it could throw at an auction.
But I’m beginning to suspect that DotMusic might have prevailed.
The company appears to have recently revamped its web site, almost as if it’s gearing up for a launch.
Comparing the current version of music.us to versions in Google’s cache, it appears that the site has been recently given a new look, new copy and even a new logo.
It’s even added a prominent header link inviting prospective resellers to sign up, using a form that also appears to have been added in the last few weeks.
These changes all seem to have been made after the crucial ICANN vote that threw out the last of DotMusic’s appeals, March 14.
Are those the actions of an applicant resigned to defeat, or has Roussos pulled off the apparently impossible, defeating two of the internet’s biggest companies to one of the industry’s most coveted and controversial strings?
Participants in gTLD auctions typically sign NDAs, so we’re going to have to wait a bit longer (probably no more than a few days) to find out which of the remaining three applicants actually won.

How new gTLD auctions could kill gaming for good

Ever heard of a Vickrey auction? Me neither, but there’s a good possibility that it could become the way most new gTLD fights get resolved in future.
It’s one of several methods being proposed to help eliminate gaming in the next new gTLD application round that have received some support in a recently closed round of public comments.
ICANN’s New gTLD Subsequent Procedures working group (SubPro) is the volunteer effort currently writing the high-level rules governing future new gTLD applications.
Two months ago, it published a preliminary report exploring possible ways that contention sets could be resolved.
The current system, from the 2012 round, actively encourages applicants to privately resolve their sets. Usually, this entails a private auction in which the winning bid is shared evenly between the losing applicants.
This has been happening for the last five years, and a lot of money has been made.
Losing auctions can be a big money-spinner. Publicly traded portfolio registry MMX, for example, has so far made a profit of over $50 million losing private auctions, judging by its annual reports. It spent $13.5 million on application fees in 2012.
MMX is actually in the registry business, of course. But there’s a concern that its numbers will encourage gaming in future.
Companies could submit applications for scores of gTLDs they have no intention of actually operating, banking on making many multiples of their investment by losing private auctions.
Pointing no fingers, it’s very probably already happened. But what to do about it?
Who’s this Vickrey chap?
One suggestion that seems to be getting some love from diverse sections of the community is a variation of the “Vickrey auction”.
Named after the Canadian Nobel Prize-winning economist William Vickrey, it’s also called a “second price sealed bid auction”.
Basically, each applicant would secretly submit the maximum price they’d be willing to pay for the contested gTLD, and the applicant with the highest bid would pay the amount of the second-highest bid.
This method has, I believe, been used more than once in private contention resolution during the 2012 round.
But under the system suggested by SubPro, each applicant would make their single, sealed, high bid at time of application, before they know who else is gunning for the same string.
That way, contention sets could be mostly eliminated right at the start of the process, leading to time and cost efficiencies.
There’d be no need for every application in a contention set to go through full evaluation. Only the high bidder would be evaluated. If it failed evaluation, the second-highest bidder would go into evaluation, etc, until a successful applicant was found.
For losing applicants, a possible benefit of this is that they’d get much more of their application fees refunded, because they’d be skipping much of the process.
Neither would they have to bear the ambient running costs of sitting on their hands for potentially years while the ICANN process plays itself out.
It could also substantially speed up the next round. If the round has five, 10, 20 or more times as many applications as the 1,930 received in 2012, resolving contention sets at the very outset could cut literally years off processing times.
The SubPro concept also envisages that the winning bid (which is to say, the second-highest bid) would go directly into ICANN’s coffers, eliminating the incentive to game the system by losing auctions.
I must admit, there’s a lot to love about it. But it has drawbacks, and critics.
Why Vickrey may suck
SubPro itself notes that the Vickrey model it outlines would have to take into account other aspects of the new gTLD program, such as community applications, applicants seeking financial support from ICANN, and objections.
It also highlights concerns that bids submitted at the time of application constitute private business-plan information that applicants may not necessarily want ICANN staff seeing (with the revolving door, this info could quite easily end up at a competitor).
Companies and constituencies responding to the recent public comment period also have concerns.
There’s hesitance among some potential applicants about being asked to submit blind bids. There are clearly cases where an applicant would be prepared to pay more to keep a gTLD out of the hands of a competitor.
One could imagine, for example, that Coca-Cola would be ready to spend a lot more money on .cola if it knew Pepsi was also bidding, and possibly less if it were only up against Wolf Cola.
The Intellectual Property Constituency raised this concern. It said that it was open to the idea of Vickrey auctions, but that it preferred that bids should be submitted after all the applications in the contention set have been revealed, rather than at time of application:

Although there is a potential downside to this in that the parties have not put a “value” on the string in advance, the reality is that many factors come into play in assessing that “value”, certainly for a brand owner applicant and possibly for all applicants, including who the other parties are and how they have indicated they intend to use the TLD.

The Brand Registry Group and Neustar were both also against the Vickrey model outlined by SubPro, but neither explained their thinking.
The Business Constituency, which is often of a mind with the IPC, in this case differed. The BC said it agreed that bids should be submitted alongside applications, only to be unsealed in the event that there is contention. The BC said:

This Vickrey auction would also resolve contention sets very early in the application evaluation process. That saves contending applicants from spending years and significant sums during the contention resolution process, which was very difficult for small applicants.

It’s hard to gauge where current registries, which are of course also likely applicants, stand on Vickrey. The Registries Stakeholder Group is a pretty diverse bunch nowadays and it submitted a set of comments that, unhelpfully, flatly contradict each other.
“Some” RySG members believe that the current evaluation and contention process should stay in place, though they’re open to a Vickrey-style auction replacing the current ascending-clock model at the last-resort stage after all evaluations are complete.
“Other” RySG members, contrarily, wholeheartedly support the idea that bids should be submitted at the time of application and the auction processed, Vickrey-style, before evaluation.
“An application process which requires a thorough evaluation of an applicant who will not later be operating the gTLD is not an efficient process,” these “other” RySG members wrote. They added:

if contention sets are resolved after the evaluation process and not at the beginning of it, like the Vickery model suggestion, it would enable applicants who applied for multiple strings to increase the size of their future bids each time they lost an auction. Each TLD needs to be treated on its own merits with no contingencies allowed for applicants with numerous applications.

It’s not at all clear which registries fall into the “some” category and which into “other”, nor is it clear the respective size of each group.
Given the lack of substantive objections to pre-evaluation Vickrey auctions from the “some” camp, I rather suspect they’re the registries hoping to make money from private settlements in the next round.
Other ideas
Other anti-gaming ideas put forward by SubPro, which did not attract a lot of support, included:

• A lottery. Contention sets would be settled by pulling an applicant’s name out of a hat.
• An RFP process. This would mean comparative, merit-based evaluation, which has never been a popular idea in ICANN circles.
• Graduated fees. Basically, applicants would pay more in application fees for each subsequent application they filed. This would disadvantage portfolio applicants, but could give smaller applicants a better shot at getting the string they want.

All of the comments filed on SubPro’s work has been fed back into the working group, where discussions about the next new gTLD round will soon enter their fourth year…

Sedo’s cunning GDPR workaround

With full Whois records set to disappear from public view for most domain names this Friday, auction house Sedo has had to resort to some technical trickery to enable its users to prove they own the domains they list for sale.
Until now, when listing a domain at Sedo, the company has checked whether the Whois record matches the data it has on file for the customer.
With that no longer possible in many cases, Sedo told users yesterday it instead wants them make updates to their DNS records, which will obviously remain public data post-GDPR.
Sedo will give each customer a personal identification number, which they will have to add to the all-purpose TXT field of their domain’s DNS record.
That’s a fairly straightforward process at most registrars, though volume domainers had better hope their registrar of choice allows DNS changes to be made in bulk.
Sedo’s calling the process “Owner Self-Verification”.
Customers who do not use the system will have to wait three business days before their names are verified. Sedo said it will manually spot-check domains and may ask for other forms of proof of ownership.
UPDATE: Many thanks to all the people on Twitter telling me this system has been in place for years. You’re all very clever. Your cookies/cigars are in the mail.

ICANN mulls $68 million raid on auction war chest

ICANN wants to put away another $68 million for a rainy day and it’s considering raiding its new gTLD auction war chest in order to do so.
It’s also thinking about dipping into the pool of cash still left over from new gTLD application fees in order to bolster is “reserve fund” from its current level of $70 million to its target of $138 million.
But, as a relief to registrants, it appears to have ruled out steep fee increases, which had been floated as an option.
The reserve fund is basically a safety net that ICANN could use to keep the lights on in the event that revenue should suddenly plummet dramatically and unexpectedly.
If, for example, Verisign returned to its old antagonistic ways and refused to pay its .com fees for some reason, ICANN would lose about a third of its annual revenue but would be able to tap its reserve until the legal fisticuffs were resolved.
ICANN said in a discussion document (pdf) this week that it took $36 million from the reserve since 2014 in order to complete the IANA transition. Over the same period, its annual budget has swelled from about $85 million to $138 million and contributions back into the reserve have been minimal.
That’s left it with a meager $70 million squirreled away, $68 million shy of its longstanding target level of one year’s budget.
ICANN is now saying that it wants to replenish the fund in less than five years.
About $15 million of its target would come from cost-cutting its operations budget over the period.
It also wants to take at least $36 million from the new gTLD auction proceeds fund, which currently stands at $104 million (with another $132 million incoming should Verisign successfully obtain .web over the objections of rival bidders).
The remaining $17 million could come from “leftover” new gTLD application fees — that fund is currently about $80 million — or from more cost-cutting or more auction proceeds, or from a combination of the three.
A fourth option — increasing the per-transaction fees registrants are charged via their registries and registrars — appears to have been ruled out.
My back-of-the-envelope maths suggests that an annual per-transaction increase of about $0.07 would have been needed to raise $68 million over five years.
The proposal is open for public comment until April 25.

How ICANN could spend its $240 million war chest

Schools, pHD students and standards groups could be among the beneficiaries of ICANN’s nearly quarter-billion-dollar new gTLD auction war chest.
But new gTLD registries hoping for to dip into the fund for marketing support are probably shit out of luck.
Those are among the preliminary conclusions of a volunteer working group that has been looking at how ICANN should spend its new gTLD program windfall.
Over 17 new gTLD auctions carried out by ICANN under its “last resort” contention resolution system, the total amount raised to date is $240,590,128.
This number could increase substantially, should still-contested strings such as .music and .gay go to last-resort auction rather than being settled privately.
Prices ranged from $1 for .webs to $135 million for .web.
ICANN has always said that the money would be held separate to its regular funding and eventually given to special projects and worthy causes.
Now, the Cross-Community Working Group on New gTLD Auction Proceeds has published its current, close-to-final preliminary thinking about which such causes should be eligible for the money, and which should not.
In a letter to ICANN (pdf), the CCWG lists 18 (currently hypothetical, yet oddly specific) example proposals for the use of auction funds, 17 of which it considers “consistent” with ICANN’s mission.
A 19th example, which would see money used to promote TLD diversity and “smells too much like marketing” according to some CCWG members, is still open for debate.
While the list of projects that could be approved for funding under the proposed regime is too long to republish here, it would for example include giving scholarships to pHD students researching internet infrastructure, funding internet security education in developing-world primary schools and internet-related disaster-recovery efforts in risk-prone regions.
The only area the CCWG appears to be reluctant to endorse funding is the case of commercial enterprises run by women and under-represented communities.
The full list can be downloaded here (pdf).
The CCWG hopes to publish its initial report for public comment not too long after ICANN 61 in March. Comment would then need to be incorporated into a final report and then ICANN would have to approve its recommendations and implement a process for actually distributing the funds.
Don’t expect any money to change hands in 2018, in other words.

GoDaddy renewal revamp “unrelated” to domainer auction outrage

GoDaddy has made some big changes to how it handles expired domain names, but denied the changes are related to domainer outrage today about “fake” auctions.
The market-leading registrar today said that it has reduced the period post-expiration during which registrants can recover their names from 42 days to 30. After day 30, registrants will no longer be able to renew or transfer affected names.
GoDaddy is also going to start cutting off customers’ MX records five days after expiry. This way, if they’re only using their domain for email, they will notice the interruption. Previously, the company did not cut off MX records.
The changes were first reported at DomainInvesting.com and subsequently confirmed by a GoDaddy spokesperson.
One impact of this will be to reduce confusion when GoDaddy puts expired domains up for auction when it’s still possible for the original registrant reclaim them, which has been the cause of complaints from prominent domain investors this week.
As DomaingGang reported yesterday, self-proclaimed “Domain King” Rick Schwartz bought the domain GoDaddyBlows.com in order to register his disgust with the practice.
Konstantinos Zournas of OnlineDomain followed up with a critique of his own today.
But the GoDaddy spokesperson denied the changes are being made in response to this week’s flak.
“This is unrelated to any events in the aftermarket,” he said. “We’ve been working on this policy for more than a year.”
He said the changes are a case of GoDaddy “optimizing our systems and processes”. The company ran an audit of when customers were renewing and found that fewer than 1% of names were renewed between days 30 and 42 following expiration, he said.
GoDaddy renews about 2.5 million domains per month in just the gTLDs it carries, according to my records, so a full 1% would equal roughly 25,000 names per month or 300,000 per year. But the company spokesperson said the actual number “quite a bit less” than that.
How many of these renewals are genuinely forgetful registrants and how many are people attempting to exploit the auction system is not known.
The changes will come into effect December 4. The news broke today because GoDaddy has started notifying its high-volume customers.

CentralNic and .CLUB reveal premium sales

CentralNic and .CLUB Domains have both revealed sales of premium domain names over the last several days.
CentralNic said yesterday that it has sold “a number” of premiums for $3.4 million.
The names are believed to be from its own portfolio, rather than registry-reserved names in any of the TLDs it manages. The company did not disclose which names, in which TLDs, it had sold.
The sale smooths out potential lumpiness in CentralNic’s revenue, and the company noted that the sales means that recurring revenue from its registrar and registry business will become an increasing proportion of its revenue as its premium portfolio diminishes.
Last week, .CLUB announced that it sold $380,793 of premium .club domains in the third quarter. That was spread over 452 domains.
The big-ticket domains were porn.club and basketball.club, sold by the registry for $85,000 together.
The Q3 headline number was a sharp decline from the Q2 spike of $2.7 million, which was boosted by auctions in China.
The company published a lot more data on its sales on its blog, here.

This is who won the .inc, .llc and .llp gTLD auctions

The winners of the auctions to run the gTLD registries for company identifiers .inc, .llc and .llp have emerged due to ICANN application withdrawals.
All three contested gTLDs had been held up for years by appeals to ICANN by Dot Registry — an applicant with the support of US states attorneys general — but went to private auction in September after the company gave up its protests for reasons its CEO doesn’t so far want to talk about.
The only auction won by Dot Registry was .llp. That stands for Limited Liability Partnership, a legal construct most often used by law firms in the US and probably the least frequently used company identifier of the three.
Google was the applicant with the most cash in all three auctions, but it declined to win any of them.
.inc seems to have been won by a Hong Kong company called GTLD Limited, run by DotAsia CEO Edmon Chong. DotAsia runs .asia, the gTLD granted by ICANN in the 2003 application round.
My understanding is that the winning bid for .inc was over $15 million.
If that’s correct, my guess is that the quickest, easiest way to make that kind of money back would be to build a business model around defensive registrations at high prices, along the lines of .sucks or .feedback.
My feedback would be that that business model would suck, so I hope I’m wrong.
There were 11 original applicants for .inc, but two companies withdrew their applications years ago.
Dot Registry, Uniregisty, Afilias, GMO, MMX, Nu Dot Co, Google and Donuts stuck around for the auction but have all now withdrawn their applications, meaning they all likely shared in the lovely big prize fund.
MMX gained $2.4 million by losing the .inc and .llc auctions, according to a recent disclosure.
.llc, a US company nomenclature with more potential customers of lower net worth, went to Afilias.
Dot Registry, MMX, Donuts, LLC Registry, Top Level Design, myLLC and Google were also in the .llc auction and have since withdrawn their applications.

Millions spent as three more new gTLDs auctioned

Two or three new gTLDs have been sold in a private auction that may well have seen over $20 million spent.
The not-yet-delegated strings .inc, .llc and (I think) .llp hit the block at some point this month.
They are the first new gTLDs to be auctioned since Verisign paid $135 million for .web a little over a year ago.
At this point, nobody wants to talk about which applicant(s) won which of the newly sold strings, but it seems that the proceeds ran into many millions.
MMX, which applied for .inc and .llc, said this morning that it has benefited from a $2.4 million windfall by losing both auctions.
The auctions evidently took place in September, but CEO Toby Hall declined to comment any further, citing non-disclosure agreements.
There were nine remaining applicants for .inc and eight for .llc.
I don’t think it’s possible to work out which sold for how much using just MMX’s disclosure.
But private auctions typically see the winning bid divided equally between the losers.
I believe .llp was probably sold off by auction at the same time.
The reason for this is that .llc, .inc and .llp were contention sets all being held up by one applicant’s dispute with ICANN.
Dot Registry LLC had applied for all three as “community” gTLDs, which meant it had to go through the Community Evaluation Process.
While it failed the CPE on all three counts, the company subsequently filed an Independent Review Process complaint against ICANN, which it won last August.
You may recall that this was the IRP that found disturbing levels of ICANN meddling in the drafting of the CPE panel’s findings.
Ever since then, ICANN has been conducting an internal review, assisted by outside experts, into how the CPE process worked (or didn’t).
Lawyers for Dot Registry and other affected applications (for .music and .gay) have been haranguing ICANN all year to get a move on and resolve the issue.
And yet, just as the end appeared to be in sight, Dot Registry seems to have decided to give up (or, possibly, cash out) and allow the strings to go to auction.
CEO Shaul Jolles declined to comment on the auctions today.
All I can currently tell you is that at least two of the Dot Registry holdout strings have been sold and that MMX did not win either of them.
The applicants for .inc were: Uniregistry, Dot Registry, Afilias, GMO, GTLD Limited, MMX, Nu Dot Co (now a known Verisign front), Donuts and Google.
The applicants for .llc were: MMX, Dot Registry, Nu Dot Co, Donuts, Afilias, Top Level Design, myLLC and Google.