XYZ.com has settled a lawsuit filed against it against Verisign stemming from XYZ’s acquisition of .theatre, .security and .protection.
Verisign sued the new gTLD registry operator for “interfering” with its back-end contracts with the previous owners last August, as part of its campaign to compete against new gTLDs in the courtroom.
XYZ had acquired the .security and .protection ICANN contracts from security Symantec, and .theatre from a company called KBE Holdings.
As part of the transitions, all three applications were modified with ICANN to name CentralNic as the back-end registry services provider, replacing Verisign.
Verisign sued on the basis of tortious interference and business conspiracy. It was thrown out of court in November then amended and re-filed.
But the case appears to have now been settled.
Negari issued a grovelling not-quite-apology statement on his blog:
I am pleased to report that the recent case filed by Verisign against CentralNic, Ltd., XYZ and myself has been settled. After looking at the claims in dispute, we regret that as a result of our acquisition of the .theatre, .security and .protection extensions and our arrangement for CentralNic to serve as the backend service provider for these extensions, that Verisign was prevented from the opportunity to pursue monetization of those relationships. As ICANN’s new gTLD program continues to evolve, we would caution others who find themselves in similar situations to be mindful of the existing contracts extension owners may have with third parties.
Registries changing their minds about their back-end provider is not unheard of.
In this case, large portions of Verisign’s final amended complaint were redacted, suggesting some peculiarities to this particular switch.
If there was a monetary component to the settlement, it was not disclosed. The original Verisign complaint had demanded damages of over $2 million.
CentralNic is set to grow revenue by almost three quarters by acquiring Australian registrar Instra for $23.7 million.
The acquisition is for AUD 33 million, AUD 30 million of which will be in cash.
CentralNic plans to raise £10 million ($15 million) with a share placement to help fund the deal.
“This acquisition will grow our current revenues by 70% and extend our retail capabilities to serve customers in the fast growing emerging markets, globally,” CEO Ben Crawford said in a statement to the markets.
Instra had revenue of AUD 14.8 million ($10.7 million) in its fiscal 2015, and was profitable.
CentralNic’s revenue for the first half of this year was £4.4 million ($6.8 million).
The deal makes CentralNic, which started life as a registry, a much larger player in the registrar market.
It acquired Internet.bs for $7.5 million a couple of years ago, which brought in $2.8 million of revenue in the first half of this year.
Instra offers 150 ccTLDs and all the gTLDs, according to CentralNic.
CentralNic saw a huge 171% increase in revenue and a tripling of billings in the first half of the year, based on its newly acquired retail business and the sale of premium names.
For the six months to the end of June, the London-based firm saw revenue of £4.4 million ($6.8 million) compared to £1.6 million ($2.5 million) a year earlier.
It moved into profit during the period, netting £287,000 ($442,000) after tax compared to a loss of £599,000 in the 2014 period.
CentralNic broke down its numbers into segments, showing that its new business areas were responsible for most of the growth, while the core registry business was relatively slow.
Registry was up 13% to £1.6 million ($2.5 million).
The new registrar business, which is lead by its $7.5 million Internet.bs acquisition, leaped from £180,000 to £1.8 million (£2.8 million), while its premium name sales business was £1.1 million compared to a negligible £50,000 a year earlier.
The company noted in a statement that Google was the first “megabrand” to use a .xyz domain name and expressed optimism that this may increase awareness of new gTLDs in future.
CentralNic is the second-largest new gTLD back-end, as measured by registration volume, largely due to its .xyz contract.
It also acts as back-end for .online, which left the blocks very quickly earlier this month, racking up over 57,000 names so far.
XYZ.com is trying to become one of the first non-Chinese gTLD registries to be able to sell unhindered into the Chinese market, in the face of Draconian government regulations.
The company has filed a Registry Services Evaluation Process request with ICANN — the first of its kind — that would let it use a gateway service, based in China, to comply with strict local laws on registries, registrars and registrants.
The Ministry of Industry and Information Technology regulations have been in place for a decade, but it’s only in the last year or so, in light of the new gTLD program, that China has been strictly enforcing them.
Anyone in China can buy a domain, but you need a license if you want to put up a web site, according to Gavin Brown, CTO of .xyz back-end CentralNic. Registrants also need to have their Whois information verified and validated, he said.
The problem for Chinese residents today is if they buy a domain in a TLD that is not licensed by the government, they won’t be able to obtain a license to host a web site on that domain.
The .xyz gTLD is believed to have a few hundred thousand domains registered via Chinese registrars, a substantial portion of its total.
There’s a worry that China could demand the deletion of these names and others, as it has previously in .cn, if the proper licenses have not been obtained.
Naturally, the inability to use these domains has led to a lot of pissed-off registrants. XYZ says has been receiving complaints from its registrars in the country, which in turn have been receiving complaints from their customers.
XYZ proposes to fix the problem by using a gateway service provided by ZDNS, a DNS provider based in mainland China.
Registrars in the country would maintain a separate EPP connection to ZDNS, which would act as a proxy to CentralNic’s UK-based primary EPP system.
ZDNS, which is prominently promoting its gateway service on its web site, would handle the Whois verification and also proxy the .xyz Whois lookup service, but only as it pertains to Chinese registrants and queries originating in China.
Data on non-Chinese registrants would continue to be housed with CentralNic.
ZDNS would also prevent Chinese registrants registering domains containing strings that have been banned by the government.
XYZ’s RSEP request (pdf) is currently undergoing its technical/competition review with ICANN. Assuming it passes, it would be exposed to public comment before being approved.
The RSEP states: “we are confident that the entire Internet user base of China would endorse this service and that Chinese registrars would strongly endorse this service.”
It’s the first such request to ICANN, suggesting that an awful lot of gTLDs are still not compliant with the Chinese regulations.
As of April, only 14 TLDs — all managed by China-based companies — were licensed to operate in China.
CentralNic’s registry back-end business may have got a big boost by last week’s news that Google has adopted a .xyz domain for its new parent, but it is not yet the biggest back-end provider.
That honor still belongs to Rightside, which currently leads CentralNic by a few hundred thousand names, according to zone files.
When Google started using abc.xyz as the primary domain for its new company last Monday, it caused a sharp spike in .xyz’s daily zone file growth.
The volume-leading new gTLD’s zone had been netting about 3,000 domains per day over the previous week, but that number has risen to almost 8,000 on average since the Google announcement.
While undoubtedly good news for XYZ.com and CentralNic, the growth has not been enough to propel CentralNic into the top-spot just yet.
CentralNic said in a press release today that it currently has 1,444,210 domains, making it the “number one registry backend”.
But according to DI’s numbers, Rightside has at least 1,701,316 domains in new gTLDs running on its back-end.
The CentralNic press release, as well as an earlier piece on The Domains, both cite ntldstats.com as their source.
That site had been listing Donuts as the top new gTLD back-end provider for over a year, with CentralNic in second place.
The problem is that Donuts is not a back-end provider. Never has been.
The portfolio registry disclosed right from the start that it was using Rightside (then Demand Media).
A Donuts spokesperson confirmed to DI today that it still uses Rightside.
The company runs its 190 delegated new gTLDs on Rightside’s back-end. Rightside manages another 39 of its own on the same infrastructure.
Combined, these gTLDs make up 1,701,316 second-level domains, making it the largest back-end registry provider.