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Virgin territory as GoDaddy pushes $30 million porn domain renewals

Kevin Murphy, November 16, 2021, Domain Registries

Brand owners big and small are in for a potential surprise December 1, as their 10-year-old .xxx domain blocks expire and registrars bill their customers to convert them into a new annually-renewing GoDaddy service.

GoDaddy confirmed to DI today that it will “auto-convert” the old Sunrise B blocks, first sold by ICM Registry in 2011, to its new AdultBlock service, which provides essentially the same functionality but across four TLDs rather than one.

Tony Kirsch, head of professional services at GoDaddy Registry, said:

Registrars have been contacting all the Sunrise B owners and advising them that as of December 1 they will be grandfathered and automatically converted into an AdultBlock service, but they have a choice to expire that or stop that happening prior to December 1.

And if it is that they don’t do that before December 1, we’ll still give them a grace period of at least 45 days. If that happens they can then, as you’d normally do, just turn around to the registrar and say “We don’t want that” and we will of course refund the money.

This means that GoDaddy, which acquired .xxx and ICM from MMX earlier this year, is billing its .xxx registrar partners to convert and renew what could be as many as 81,000 Sunrise B blocks.

While the registry fee for AdultBlock has not been published, retail registrars I checked have priced the service at $370 to $400 per year, which we can probably assume is low-end pricing. Most .xxx domains are sold via the specialist brand-protection registrars like CSC and Markmonitor, which sometimes have more complex pricing.

So that’s something in the ballpark of $30 million worth of renewal invoices being sent out in the coming weeks, for something in many cases brand owners may have institutionally forgot about.

Kirsch said that AdultBlock was introduced by MMX about 18 months ago and that registrars have been preparing their customers for the Sunrise B expiration for some time.

Sunrise B was a program, unprecedented in the industry at the time, whereby trademark owners could pay a one-off fee — ICM charged its registrars about $160 wholesale — to have their brands removed from the available pool.

The domains exist in the .xxx zone file and resolve to a black page bearing the words “This domain has been reserved from registration”, but they’re not registered and usable like normal defensive or sunrise registrations would be.

Companies got to avoid not only the potential embarrassment of being porn-squatted, but also the hassle of having to explain to a tabloid reporter why they “owned” the .xxx domain in question.

The term of the Sunrise B block was 10 years. ICM told me at the time that this was because the company’s initial registry contract with ICANN only lasted for 10 years, so it was legally unable to sell longer-term blocks, but I’ve never been sure how much I buy that explanation.

Regardless, that 10 year period comes to an end in two weeks.

Because Sunrise B was unprecedented, this first renewal phase is also unprecedented. We’re in virgin territory (pun, of course, very much intended) here.

Will we see the industry’s first public “block junk drop”?

There are a number of reasons to believe trademark owners, assuming they don’t just blindly pay their registrar’s invoices, would choose to allow their blocks to expire or to ask for a refund after the fact.

First, the price has gone up — a lot.

While ICM charged $160 for a 10-year Sunrise B block (maybe marked up by registrars to a few hundred bucks) brand owners can expect to pay something like $3,000 retail for a single string blocked for 10 years.

But buyers do get a bit more bang for their buck. Unlike Sunrise B, AdultBlock also blocks the trademark in three additional GoDaddy-owned TLDs — .porn, .sex and .adult — as standard.

Kirsch said he expects buyers to see a 40% to 50% saving compared to the cost of defensively registering each domain individually.

Second, the appetite for defensive registrations has waned over the past 10 years, with trademark owners employing more nuanced approaches to brand protection, largely due to the flood of new gTLDs since 2013.

When .adult, .sex and .porn launched, without the possibility of Sunrise B blocks, they got about 2,000 regular sunrise registrations each. And that’s extraordinarily high — for most new gTLDs a couple hundred was a good turnout.

Third, the .xxx launch attracted a whole lot of controversy and overreaction, and the .xxx zone file today contains a lot of Sunrise B crap.

When I scrolled a little through the zone, cherry-picking silly-looking blocks in 2019, I found these examples:

100percentwholewheatthatkidslovetoeat.xxx, 101waystoleaveagameshow.xxx, 1firstnationalmergersandacquisitions.xxx, 1stchoiceliquorsuperstore.xxx, 2bupushingalltherightbuttons.xxx, 247claimsservicethesupportyouneed30minutesguaranteed.xxx, 3pathpowerdeliverysystembypioneermagneticsinc.xxx

Is it worth $400 a year to block the trademark “100 Percent Whole Wheat That Kids Love To Eat”? Is there any real danger of a cybersquatter going after that particular brand (apart from the fact that I’ve now written about it twice)?

Kirsch said a “small percentage” of Sunrise B owners have already said they don’t want to convert, but given that the rest will auto-convert, and that the registrars are doing all the customer-facing stuff, the company has limited visibility into likely uptake.

Brian King, director of policy at MarkMonitor, told us: “We generally encourage our clients to consider blocks. They can be cost effective and a lot of times clients would rather have their brand be unavailable without having to register in TLDs where they don’t want to own domain registrations for any number of reasons.”

One reason brand owners may want to consider converting to AdultBlock — it’s rumored that GoDaddy will be relaxing its eligibility criteria for .xxx next year, removing the requirement for registrants to have a nexus to the porn industry.

It’s always been kind of a bullshit rule, basically a hack to allow ICM to run a “sponsored” TLD under ICANN’s rules from the 2003 application round, but doing away with it would potentially make it easier for cybersquatters to get their hands on .xxx domains.

CSC told customers in a recent webinar that the rules are likely to be changed next year, increasing the risk of cybersquatting.

There’s some circumstantial evidence to suggest that CSC might be on to something — pretty much every “sponsored” gTLD from the same 2003 application round as .xxx has relaxed their reg rules to some extent, sometimes when their contracts come up for renewal and ICANN tries to normalize them with the text of the standard 2012-round agreement.

And GoDaddy’s .xxx contract with ICANN is being renegotiated right now. It was due to expire in March, but it was extended in February until December 15, a little under a month from now. We may soon see ICANN open up the new text for public comment.

Kirsch, who’s not part of the negotiations, could not confirm that the eligibility relaxation is going to happen or that it’s something GoDaddy is pushing for.

If it were to happen, it wouldn’t be for some time, and it wouldn’t necessarily impact on the December 1 deadline for Sunrise B conversions, which is going to be interesting to watch in its own right.

“There are registrations that are protecting people’s trademarks that are expiring and our primary objective here is to ensure that that protection continues, and that’s what we’ll do,” GoDaddy’s Kirsch said.

“If we just let them expire, it would create a lot of opportunity for brand infringement. Faced with that choice, our primary objective is to protect trademark owners,” he said.

MMX’s year marked by terrible renewals

MMX saw its revenue dip in 2020, and it reported shocking renewal rates at two of its highest-volume gTLDs, according to the company’s annual financial results, published this morning.

The portfolio registry, which is in the process of selling off essentially its entire operating business to GoDaddy, reported revenue of $16.8 million for the year, down from $17.2 million in 2019.

Profit was up very slighty, to $2.9 million from $2.8 million.

The 2019 results included a few one-off gains, including $588,000 from losing a new gTLD auction, which accounted for most of the 2020 revenue decline.

But the company also reported a 19% decline in domains under management, from 2.46 million to 1.99 million, based on some terrible renewal rates in its .vip and .work gTLDs.

The DUM decline can be attributed mostly to .vip, a popular TLD among Chinese speculators, which started 2020 with around 1.4 million domains but finished the year with just over a million.

.work actually ended the year up on where it started, with around 709,000 names under management.

But MMX today disclosed that the renewal rates for .vip and .work were 36% and 18% respectively. In a business where 70%+ is considered healthy, these are some poor numbers indeed.

However, the company discontinued first-year promotions on these TLDs in 2020, focusing instead on selling domains likely to lead to recurring renewal revenue, which lead to 14% (.vip) and 19% (.work) increases in revenue.

Fewer domains. More money.

MMX said that it is seeing these trends continuing into 2021. Public transaction reports show both these TLDs losing 40-50,0000 names in January. The company expects revenue to fall 4% in the first quarter compared to Q1 2020.

One bright spot appears to be “The Great Relese”, the company’s move last month to mark down hundreds of thousands of premium-priced domains. That’s brought in $170,000 since its April 23 launch.

One basket where the company is placing a lot of its eggs is AdultBlock, the trademark protection service it inherited when it acquired ICM Registry a few years back. It enables customers to block their brands in .xxx, .porn, .adult and .sex without actually having to register the names.

The 10-year period ICM allowed brands to block when it launched in 2011 is coming to an end, so MMX is banking on renewals (which retail at $349 to $799 per year before multi-year discounts) to boost revenue.

“While it is early in the AdultBlock Sunrise B renewal period, we are encouraged by Registrar interest and some early sales of this product,” CEO Tony Farrow said in a statement.

This reliance on AdultBlock for short-term organic growth was one of the reasons MMX is selling up to GoDaddy.

The market-leading registrar and fast-emerging registry consolidator agreed to pay $120 million for MMX’s portfolio, which will leave MMX as a shell company only long enough to distribute the cash to investors before fading away quietly.

That deal has an August deadline to close and is dependent on approvals from business partners, ICANN and the Chinese government.

After lawsuit, YouPorn buys into .xxx portfolio

Kevin Murphy, December 8, 2014, Domain Registries

Porn site operator Manwin Licensing, known to the domain industry for its antitrust lawsuit against ICANN and ICM Registry that was settled last year, has taken over a portfolio of .xxx domains from a staunch .xxx supporter.

Now known as MindGeek, the YouPorn operator is to manage sites for Really Useful, one of the most enthusiastic buyers of premium .xxx domain names.

Really Useful was the first company to have a live .xxx web site — casting.xxx. It has also bought premiums such as orgasms.xxx, bdsm.xxx, mature.xxx, publicsex.xxx, czech.xxx, tubes.xxx, teen.xxx and mom.xxx directly from ICM.

Its spokesperson, “JT”, has expressed his support for .xxx in a few ICM press releases.

MindGeek is also taking over a selection of .com domains as part of the deal.

As Manwin, MindGeek sued ICANN and ICM in late 2011, alleging breaches of US antitrust law. It claimed the need for defensive registrations when .xxx launched amounted to “extortion”.

The suit was settled by ICM last year, but not before a California court ruled that ICANN is not immune to antitrust law.

Now, MindGeek seems to think .xxx domains are okay. Its director of global sales, “Nick P”, reportedly said: “JT’s content and brands are among the hottest on the Internet right now and the future sites planned are phenomenal.”

In unrelated news, MindGeek came under fire this week for producing a series of porn videos that allegedly depict the simulated rape of illegal immigrants by US border patrols.

ICM will NOT offer free .porn names to .xxx buyers

Kevin Murphy, November 10, 2014, Domain Registries

ICM Registry has reneged on its promise to “grandfather” trademark owners and other .xxx registrants in its forthcoming .sex, .porn and .adult new gTLDs.

While the changes are sure to infuriate trademark owners and .xxx registrants, the company insists that ICANN is to blame for blocking its original plans.

Originally, ICM had promised to reserve every .sex, .porn and .adult domain that matched an existing .xxx domain — if you owned or had blocked example.xxx then example.porn and so on would be reserved.

There was not to be a charge for any of these reservations.

The current versions of ICM’s new gTLD applications are unequivocal — nobody who owns a .xxx name or bought a block will be charged for the equivalent .sex, .porn or .adult names or blocks.

On names “blocked” by trademark owners during the .xxx Sunrise B period, the applications state:

All existing blocked names under the .XXX Sunrise B program… will not need to take any action to have those same names blocked in the new gTLD. All of these matching names will be automatically reserved from registration in the new TLD, free of charge.

On names registered in general availability, the applications state:

all existing .XXX names will be reserved from registration in the new gTLD and only registrants of that .XXX name will be given the opportunity to initially register that corresponding .XXX name in the new gTLD. If the .XXX registrant elects to register the name in the new gTLD, this can be done for a low annual fee. If the .XXX registrant does not elect to register the name in the new gTLD, then the new, matching, gTLD name will be reserved on [ICM’s] registry-reserved list at NO cost.

While neither application has been amended yet, neither of these statements are any longer true, ICM has confirmed.

Instead, the company’s new Domain Matching Program anticipates an extra launch phase between Sunrise and general availability. Under ICANN rules, it’s a Limited Registration Period.

During this month-long phase, anyone who owns a .xxx domain or block will be able to purchase the matching new gTLD names, unless it has already been registered in the Sunrise period.

What does this all mean…

For regular .xxx registrants?

If you own a .xxx domain, you no longer get a free permanent reservation on the matching .porn, .sex and .adult names while you make up your mind whether to buy them.

Instead, you’ll have to buy it during the 30-day DMP window.

ICM’s fee for DMP and Sunrise will be the same as for general availability, ICM CEO Stuart Lawley told DI.

Also, if there’s a trademark in the Trademark Clearinghouse that matches your second-level string, that trademark’s owner will be able to register the matching names before you get a chance.

Remember, not all TMCH users are legitimate brands. Some are domain investors gaming the system.

For premium .xxx buyers?

The changes may also concern registrants of “premium” .xxx names, many of which may have assumed they’d get the matching .porn, .sex and .adult reservations free of charge.

Porn site operators Really Useful and Barron Innovations, which have spent millions apiece on premium .xxx names such as teen.xxx and sex.xxx, have both said in ICM press releases that the grandfathering program formed an important part of their decision-making.

“We look forward to enjoying the benefits of ICM’s unique Domain Matching Program, which gives .XXX holders an opportunity to secure matching .XXX domain names in .PORN, .ADULT and .SEX,” Barron spokesperson Shay Efron said when the $3 million sale of sex.xxx was announced.

“We will be speaking individually to each premium name holder who purchased premium names after we had announced the original grandfathering plan,” Lawley told us.

It seems that the premium string will be registry-reserved, however, so there’s no chance of them being snapped up during Sunrise.

For brands?

If you’re a brand who bought a .xxx block during the Sunrise B period back in 2011, you no longer get grandfathered into a free permanent reservation in .sex, .adult and .porn.

Instead, you’ll have to buy your names as usual either during Sunrise, DMP or — if you feel like taking a risk — general availability.

The problem is: you only qualify for Sunrise if you’re registered in the TMCH, and most Sunrise B buyers are not.

Something like 70,000 names were registered during the .xxx Sunrise B period three years ago, but there are only 33,000 marks registered in the TMCH today.

The owners of more than half of the Sunrise B blocks, who may have thought their blocks would carry over to ICM’s three new gTLDs free of charge, currently do not even have the right to buy their names in Sunrise.

If you have a .xxx Sunrise B block AND are in the TMCH, you may find yourself competing with other trademark owners with matching marks during the .porn, .adult and .sex Sunrise periods.

Any Sunrise B match not registered during the Sunrise and DMP phases will be up for grabs during GA, just the same as any other domain.

Lawley reminds us that the .xxx Sunrise B predated ICM’s new gTLD applications by many months — nobody bought a block in 2011 thinking it would be enforced in all four gTLDs.

He added that ICM has “recently secured a unique offer through the TMCH that will enable trademark owners to register with the TMCH for one year, at a reduced fee.”

Why did ICM make the changes?

The changes put the registry on a collision course with the Intellectual Property Constituency of ICANN, which looks out for the interests of trademark owners and is not a fan of porn-themed TLDs.

“The IPC is going to collectively shit a brick,” one IPC member told us.

But the IPC, which has been unshakable when it comes to the strict enforcement of ICANN’s mandatory new gTLD rights protection mechanisms, may have shot itself in the foot to an extent.

According to ICM, it’s ICANN’s fault, and indirectly the IPC’s, that it’s had to abandon free grandfathering.

In a statement sent to DI, the company said:

Throughout the ICANN approval process, ICM pursued multiple pathways to try and ensure its original “grandfathering plan”. However, due to technological concerns and strong trademark protection policies that ICANN’s intellectual property community requires in all new gTLDs, ICANN flatly rejected ICM’s grandfathering plan.

The mandatory new gTLD rights protection mechanisms enforced by ICANN means that no domain names may be set aside before trademark owners have had a crack at the Sunrise period, ICM said:

Those rights protections require that TMCH-validated Sunrise Holders get the first priority for names in any new gTLD and also contain certain prohibitions on all registries from earmarking domain names for third parties.

However, ICM has still managed to set aside an unknown number of names as part of its Premium Domains Program — those names will be immune from registration during both Sunrise and the DMP.

It’s also going to reserve, free of charge, a bunch of “culturally sensitive” names — these are strings that members of the ICANN Governmental Advisory Committee asked to be reserved in .xxx.

Names related to child abuse material will also be registry-reserved at no cost to the child protection agencies that requested the blocks when .xxx launched.

Plenty of stuff is getting reserved, just not Sunrise B blocks.

ICANN’s rules against “earmarking” domains may have prevented ICM offering matching domains to regular .xxx registrants, but it’s hard to see how that would prevent a .xxx block carrying over to .porn. Blocks are not assigned to a specific registrant; they belong to the registry.

The .adult and .porn gTLDs are set to start their 30-day Sunrise periods March 1, 2015. The 30-day DMP for both will begin April 15.

The .sex gTLD was contested, so it’s running a little behind. ICM expects to launch it later in 2015.

YouPorn spanks ICM as .xxx prices slashed

YouPorn owner Manwin Licensing scored a PR coup in its lawsuit against ICM Registry today, when the .xxx registry agreed to steep financial concessions in order to settle the case.

One of the effects of the settlement, at least according to Manwin, is that .xxx is slashing its registry fees from $60 to $7.85 a year for any new domains registered in May.

That brings .xxx into line with .com pricing, temporarily.

The discount only lasts for a month, but it applies to any length of registration up to 10 years. A 10-year registration would see ICM get $78.50, as opposed to the usual $600.

ICM said it will offer price reductions in future years too.

According to Manwin, this reduction is part of the settlement of the anti-trust lawsuit that it filed in November 2011.

“One of Manwin’s key motivations was to make .XXX pricing lower and more competitive,” the company said in a press release.

However, ICM told its registrars about the price reduction over a month ago, so Manwin’s claims might not be as straightforward as they seem.

What’s less open to interpretation is ICM’s agreement to donate $2 from every new .xxx domain created into “a fund designated by Manwin to support the adult entertainment industry”.

In return, Manwin has agreed to drop its boycott of .xxx — ads for .xxx sites will now be allowed to appear on its highly trafficked “tube” sites.

According to a Manwin press release, ICM has also made the humbling admission that “websites hosted on their adult-specific TLDs are not the only responsible and safe adult content websites.”

The lawsuit originally claimed that ICM and ICANN acted anti-competitively by introducing .xxx. ICM counter-sued saying that Manwin’s boycott was illegal.

Investors circle ICM as .xxx enters home straight

ICM Registry’s board of directors has approved a $5 million funding round, following the recent decision by ICANN to put the .xxx top-level domain onto the path to approval.

ICM president Stuart Lawley tells me he’s underwritten the whole round himself, already injecting another $500,000 of his own money into the company.

Venture capital investors have already approached the company, following the Brussels decision two weeks ago, according to Lawley.

In Brussels, ICANN’s board resolved to re-enter contract negotiations with ICM, following years of wrangling with ICANN’s appeals and independent review processes.

While .xxx’s approval and entry to the DNS root is not a slam-dunk, the only major hurdle appears to be ICANN’s Governmental Advisory Committee, and many believe the GAC is unlikely to stick its neck out on such a controversial issue.

While demand for .xxx domains is yet to be proven, there are already 162,000 pre-registrations, which would work out to a $10 million business, not including premium sunrise and landrush fees.

A report in Business Week last week said ICM could bring in $200 million per year in revenue on registrations alone.

I think that’s a pretty ambitious prediction, to be honest, and I can’t help but wonder in Business Week got ICM’s ten-year and one-year projections mixed up.

Even at $60 a pop, that’s still 3.3 million registered domains. The stars will have to align in unexpected ways for .xxx to reach that kind of penetration (pun intended).

ICM has previously projected near-term registrations in the low-mid hundreds of thousands.

ICM is currently owned by a close-knit group of investors, mainly Lawley’s circle and ICM’s management, with Lawley himself owning roughly 70% of the business.

Dot-XXX lights fire under ICANN’s feet

Kevin Murphy, March 22, 2010, Domain Registries

ICM Registry has urged ICANN to stop messing around and finalise the contract that would add .xxx to the domain name system.

“There is no legitimate obstacle to the approval of ICM’s registry agreement,” ICM chair Stuart Lawley said in a letter to ICANN yesterday. “We can see no reason for further delay in the process of approving ICM’s registry agreement”.

At its Nairobi meeting earlier this month, ICANN’s board decided to hand the problem of how to handle .xxx to its staff, saying it “wishes to create a transparent set of process options which can be published for public comment.”

ICM now claims that no such process options are necessary. The .post application, Lawley said, was approved last December, six years after it was made, without the need for any new processes.

There are some differences between .post and .xxx, of course. While the .xxx application has previously been approved, it has also previously been rejected.

It is back on the table following an Independent Review Panel decision that ICANN broke its fairness rules by singling out ICM for special treatment.

Lawley reminds ICANN of as much several times in his latest letter, which can be found here.

ICANN’s staff is expected to deliver its process options next week. There will be a period of public comment, and the board will have to make a call by its June meeting in Brussels.

ICANN: .xxx is not approved

Kevin Murphy, March 12, 2010, Domain Registries

ICANN never makes a decision if it can make a process instead, and that seems to be the case with the board’s latest call on .xxx.

The board voted this morning to kick ICM’s proposal until after the Brussels meeting in June, on the basis that it needs a process by which it can approve .xxx.

While this is mixed news for ICM – it’s not what it hoped for but the company still has a pretty good chance of getting what it wants – the language used in the resolution clearly indicates that the board believes .xxx is currently in an unapproved state: (continue reading)