ICANN has doubled the amount it will charge ICM Registry to register .xxx domain names, adding potentially hundreds of thousands of dollars to its top line.
The two parties yesterday signed a registry agreement (pdf), but it has been revised in quite significant ways since the last published version.
In short: ICANN has substantially increased its revenue whilst substantially reducing its risk.
Notably, ICANN will now charge the registry $2 per .xxx domain per year, compared to the $1 anticipated by the version of the contract published in August 2010 (pdf).
With ICM hoping for 300,000 to 500,000 registrations in its first year, that’s a nice chunk of change. Porn domains could be a $1 million business for ICANN quite soon.
For comparison, successful applicants under the new generic top-level domains program will only have to pay $0.25 per domain per year, and that fee only kicks in after 50,000 domains.
If there’s a .sex or a .porn, they’ll pay an ICANN fee an eighth of ICM’s.
Text from the new gTLD Applicant Guidebook that allows ICANN to raise fees in line with US inflation has also been added to ICM’s contract.
ICANN said in a blog post that the increases “account for anticipated risks and compliance activities”. It appears to be expecting trouble.
A number of other changes address the legal risks and compliance problems ICANN seems to be anticipating.
The contract now allows ICANN to more easily impose monetary fines on ICM for non-compliance, for example.
A new mediation procedure has been added to resolve disputes, to come between face-to-face talks and formal arbitration.
The contract would also would oblige ICM to pay for ICANN’s legal costs in the event of a third-party dispute, such as an Independent Review Panel hearing, being filed.
While the original contract required ICM to indemnify ICANN against third-party lawsuits, the revised version also includes a broad waiver (pdf) “to resolve all outstanding dispute/possible litigation matters” between ICM and ICANN.
I am not a lawyer, but it appears that ICM has signed away a fairly comprehensive chunks of its rights, and has agreed to shoulder most of the risk, in order to get its hands on the potentially lucrative deal.
The Free Speech Coalition has announced support for its .xxx boycott from what looks to be a significant player in the porn affiliate network market.
Gamma Entertainment, which runs programs such as LiveBucks.com, said it plans to defensively register some of its brands in .xxx.
But for every dollar the company spends with ICM Registry, it also plans to make a matching donation to the top-level domain’s opponents, such as the FSC.
Xbiz quotes Gamma president Karl Bernard: “Gamma is committed to using our resources to lead by example – by pledging our support in the efforts to combat ICM’s .xxx.”
The company will continue to focus development on its .com web sites, according to the article.
The forthcoming .xxx top-level domain will have some of the strictest abuse policies yet, including a super-fast alternative to the UDRP for cybersquatting cases.
With ICM Registry likely to sign its registry contract with ICANN soon, I thought I’d take another look at some of its planned policies.
I’d almost forgotten how tight they were.
Don’t expect much privacy
ICM plans to verify your identity before you register a .xxx domain.
While the details of how this will be carried out have not yet been revealed, I expect the company to turn to third-party sources to verify that the details entered into the Whois match a real person.
Registrants will also have to verify their email addresses and have their IP addresses recorded.
Whois privacy/proxy services offered by registrars will have to be pre-approved by ICM, “limited to services that have demonstrated responsible and responsive business practices”.
Registrants using such services will still have their full verified details stored by the registry, in contrast to TLDs such as .com, where the true identity of a registrant is only known to the proxy service.
None of these measures are foolproof, of course, but they would raise barriers to cybersquatting not found in other TLDs.
Really rapid suspension
The .xxx domain will of course abide by the UDRP when it comes to cybersquatting complaints, but it is planning another, far more Draconian suspension policy called Rapid Takedown.
Noting that “the majority of UDRP cases involve obvious variants of well-known trademarks”, ICM says it “does not believe that the clearest cases of abusive domain registration require the expense and time involved in traditional UDRP filings.”
The Rapid Takedown policy is modeled on the Digital Millennium Copyright Act. Trademark holders will be able to make a cybersquatting complaint and have it heard within 48 hours.
Complaints will comprise a “simple statement of a claim involving a well-known or otherwise inherently distinctive mark and a domain name for which no conceivable good faith basis exists”.
A “response team” of UDRP panelists will decide on that basis whether to suspend the domain, although it does not appear that ownership will be transferred as a result.
X strikes and you’re out
ICM plans to disqualify repeat cybersquatters from holding any .xxx domains, whether all their domains infringe trademarks or not.
The policy is not fully fleshed out, so it’s not yet clear how many infringing domains you’d have to own before you lose your .xxx privileges.
High-volume domain investors would therefore be advised to make sure they have clean portfolios, or risk losing their whole investment.
ICM plans to allow IP rights holders to buy long-term, deep-discount registrations for non-resolving .xxx domains. As I’ve written before, Disney doesn’t necessarily want disney.xxx to point anywhere.
That would obviously appeal to volume speculators who don’t fancy the $60-a-year registry fee, so the company plans to create a policy stating that non-resolving domains will not be able to convert to normal domains.
There’s also going to be something called the Charter Eligibility Dispute Resolution Process, which which “will be available to challenge any resolving registration to an entity that is not qualified to register a resolving name in the .xxx TLD”.
This seems to suggest that somebody (think: a well-funded church) who does not identify as a member of the porn industry would be at risk of losing their .xxx domains.
The CEDRP, like most of the abuse policies the registry is planning, has not yet been fully fleshed out.
I’m told ICM is working on that at the moment. In the meantime, its policy plans are outlined in this PDF.
The Free Speech Coalition has made good on its promise to start a boycott of .xxx domain names.
The California-based porn industry association has just launched a “Just Say NO” campaign, in an attempt to persuade pornographers that .xxx domains are bad for business.
Do the math – it doesn’t add up. Even if ICM’s claims of new consumers who “trust” .XXX ring true, for a company like Kink.com, which has approximately 10,000 domain names, it would have to bring in three-quarters of a million dollars in new revenues annually JUST TO BREAK EVEN!
As well as the retail price of the domains, which currently estimated to be north of $70 per year, the FSC has laid out a bunch of other reasons why it believes .xxx is a bad investment.
These include the fact that some countries (I’m aware of Saudi Arabia and India) have said they intend to block .xxx domains, and that this may make some high-traffic web sites wary of linking to them.
It’s also critical of how .xxx sites will have to comply with policies created by the International Foundation For Online Responsibility, which ICM is setting up to “sponsor” .xxx.
But perhaps the most telling quote in the FSC’s press release comes from its executive director, Diane Duke. She said:
FSC acknowledges and respects that, when push comes to shove, businesses need to do what they think is best for their company. That is why adult companies need to know the implications of purchasing .XXX domain names and why buying .XXX could be the worst investment they’ll ever make.
While FSC makes good points, I agree with Mike Berkens of TheDomains. I just can’t see a boycott working, and the end result may just be to just make FSC look naïve.
If you’re a pornographer, and you think there’s even an outside chance of .xxx taking off, would you risk declining to defensively register your brands on a matter of principle?
The cost of enforcing trademarks — if you have one — via the UDRP post-sunrise would be larger than simply registering them up-front, and there would be no guarantee of success.
It’s a big risk, one that I can’t see many potential registrants taking.
Some in the porn business even believe that some webmasters publicly decrying .xxx are doing so primarily to reduce competition for the premium real estate. Writing in Xbiz, Stephen Yagielowicz said:
some of your “friends” that are telling you to avoid the new adult domain extension, are speculators hoping to lessen the competition for premium .XXX names; while others are mere hucksters, seeking to profit by offering “an alternative TLD” — such as .adult, .porn, .sex or “dot-whatever-does-not-involve-Stuart-Lawley”
ICM Registry has now taken over 500,000 reservations for .xxx domain names.
The counter on its web site ticked up by about 150,000 overnight. This was apparently due to the bulk uploading of large requests from several dozen enthusiastic potential registrants.
ICM tells me that these are all requests for unique domains, not counting duplicates, and that over 100,000 requests were not added because they did not appear to come from legit sources.
The counter was around the 200,000 mark last Friday, before ICANN approved ICM’s .xxx registry contract. The deal generated substantial media interest.
Again, it’s worth noting that none of these reservations are guaranteed to convert into sales, they’re basically just requests to be notified when the domains become available.
The price of a .xxx domain is expected to be at least $70 a year, which could scare off some buyers.
Still, coupled with landrush and Founders Program sales, I’m fairly confident that ICM, which spent about $12 million fighting ICANN for .xxx, will recoup its investment before the end of the year.