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Second emergency registry tested with dead dot-brand

Kevin Murphy, April 27, 2017, Domain Registries

ICANN is running its second test of the Emergency Back-End Registry Operator system, designed as a failover for bankrupt gTLDs.

This time, the EBERO under the microscope is CORE Association, one of the three approved providers.

It this week took over operation of .mtpc, a dot-brand gTLD that Mitsubishi applied for, was delegated, never used, and then decided it didn’t want to run any more.

ICANN said:

ICANN is conducting a test of the Emergency Back-End Registry Operator program. Simulating an emergency registry operator transition will provide valuable insight into the effectiveness of procedures for addressing potential gTLD service interruptions. Lessons learned will be used to support ICANN’s efforts to ensure the security, stability and resiliency of the Internet and the Domain Name System.

The first test was conducted by ICANN and EBERO provider Nominet earlier this year, using the similarly unloved dot-brand .doosan.

I expect we’ll see a third test before long, using CNNIC, the third EBERO provider.

It would have plenty of dead dot-brands to choose from.

MMX stung for $7.7 million by crappy .london contract?

Kevin Murphy, April 26, 2017, Domain Registries

Did MMX take a $7.7 million accounting hit to renegotiate a crappy .london gTLD contract? It looks a bit like that to me.

Found in the company’s full-year 2016 financial results yesterday is the disclosure that it had to pay off an undisclosed gTLD partner after originally making “overly ambitious” predictions about its likely popularity.

The deal apparently had MMX — then under previous management as Minds + Machines — making guaranteed payments to its partner on the assumption that it would sell a lot more domains than it eventually did.

.london currently has about 56,000 names in its zone file, down from a post-launch peak of about 65,000.

According to its statement to the markets, MMX recorded a 2016 one-time contract restructuring expense of $3.8 million and has added a $3.9 million intangible asset to its balance sheet in relation to the contract.

That’s a total of $7.7 million, but CEO Toby Hall told DI that the cash payment was nowhere near that amount. He said:

in reality we have paid no where near that amount and much of this is the accounting treatment of a new contract that we believe has the potential to deliver future economic value to the business and will be covered from future revenues.

The gTLD in question is not named in the statement, and Hall also declined to name it in response to a DI inquiry, but MMX says of the contract:

In very early 2012, at the time when ICANN was still accepting new generic Top Level Domain applications, the then Executive Team entered into an overly ambitious agreement that it believed would provide value to the overall profile of the Group. The agreement had very significant financial commitments over the life of the contract and did not include any clauses that could allow the Group to renegotiate those commitments should the specific top-level domain not perform to the agreed financial projections. The growth of this top-level domain has not come close to meeting those expectations and the agreement has proven – and would have continued proving – to be a significant drag on the Group’s ability to generate positive cashflow from the given TLD.

In late Q4 of 2016 the current Executive team was able to successfully conclude renegotiations of certain components of the agreement by either restructuring or buying out certain financial commitments thus making it more economically viable going forward. As a result of the renegotiation effort, the Group has revised its modeling and believes that it can derive future economic benefit from the renegotiated contract. Accordingly, based on Management’s review, a portion of the buy out ($3.8million) has been expensed as a one-off restructuring cost while the remaining portion ($3.9million) will be capitalized as an intangible asset with future economic benefit.

All the evidence points to .london being the gTLD in question.

First, MMX says that the deal was entered into in “very early 2012”, which ties up with the timing of the request for proposals by the Mayor’s marketing office, London & Partners.

Second, MMX doesn’t have any other partner-based gTLDs that would plausibly have such ambitious commitments.

Third, MMX has previously stated that it was renegotiating some “burdensome” contracts. Last year, without relating it to a renegotiation, it said in a trading update that it was “encouraging to see an increasingly commercial and flexible approach from London & Partners, our Dot London partners”.

Fourth, word on the street back in 2012 was that L&P (which remember is affiliated with the London Mayor, an elected political office) had gone with tax-haven-based MMX rather than UK-based non-profit Nominet because MMX (then Minds + Machines) had offered the best financial incentives.

The scrapping of the old deal is perhaps another indicator of the hubris that accompanied the opening of the new gTLD program five years ago.

While L&P is the “owner” of .london, for want of a better word, in practice I gather that MMX runs it pretty much as if the gTLD was part of its regular portfolio.

The news of the contract changes were made in MMX’s audited 2016 results, which showed its billings doubling to $15.8 million during the year.

Revenue was $15 million, up from $6.3 million in 2015. Less partner payments, revenue was $13.5 million versus $5.5 million a year earlier.

The statement has half a dozen or more bottom lines, depending on what costs you exclude, but the one MMX wants us to look at is “Billings Operating EBITDA before one off restructuring costs”, which was $4.2 million compared to a loss of $6.6 million in 2015.

That, in other words, means that an unprofitable company has become a profitable one.

A lot of that has to do with the revenue from hundreds of thousands of .vip domain sales in China and a swingeing restructuring that led to headcount being slashed from 43 people to 20 people.

The company also sold off its registrar business to Uniregistry and started outsourcing its back-end functions to Nominet.

For 2017, the company has already disclosed two huge sales that will boost domains under management considerably, but at the risk of concentrating a larger part of MMX’s business outlook in just a few hands.

UPDATE: This article was updated a few hours after publication to clarify what MMX has said in relation to .london in previous trading statements.

MarkMonitor tells .feedback to take a hike after “breach” claim

Kevin Murphy, April 25, 2017, Domain Registrars

MarkMonitor is to voluntarily terminate its registrar relationship with Top Level Spectrum after the .feedback registry hit it with a breach of contract notice.

Troy Fuhriman, director of domain management at the registrar, told DI today that the company has just sent TLS a letter stating that it no longer wishes to sell .feedback names.

TLS earlier this month accused MarkMonitor of breaking the terms of its Registry-Registrar Agreements by leaking details of that agreement to media outlets including yours truly.

While TLS CEO Jay Westerdal told DI that an apology from MarkMonitor would be enough to make the termination threat go away, MarkMonitor has clearly decided against that route.

“We’re going to terminate all accreditation agreements for .feedback,” he said. “In part it’s a response to ICANN’s finding that Top Level Spectrum violated its Pubic Interest Commitments, and what we believe is a retaliatory breach notification from them.”

MarkMonitor and a small posse of high-profile clients including Facebook recently won a Public Interest Commitment Dispute Resolution Policy complaint against .feedback, related to the transparency of its launch policies and pricing.

It was in that complaint that MarkMonitor released details contained in the RRA that TLS deemed to be confidential.

Terminating the agreement means that MarkMonitor will no longer be able to sell .feedback names as a registrar and will have to transfer its existing registrations to a different registrar.

Not many clients are affected. MarkMonitor had only 45 .feedback domains under management at the last count (which was still enough to make it the fourth-largest independent .feedback registrar).

Most of these domains will be moved to 101domain, which with fewer than 200 domains is still the leading .feedback registrar.

UPDATE: Westerdal says that MarkMonitor was in fact terminated on Monday. Neither party claims that MarkMonitor made any effort to comply with the breach notice by apologizing.

Mystery buyer pumps $500,000 into MMX gTLDs

Kevin Murphy, April 19, 2017, Domain Registries

MMX has inked a deal to sell 90,000 domain names to a mystery buyer.

The company formerly known as Minds + Machines today disclosed to the markets that the deal is worth $500,000 in the first year, and that the names will be registered at some point over the coming 12 months.

CEO Toby Hall declined to identify the buyer or the gTLDs concerned, but told DI that it’s an end-user buyer rather than a domain investor, and that the buyer is not Chinese.

It’s unrelated to the $1.3 million a Chinese domain investor paid for 200,000 .vip domains a couple weeks ago.

In both cases, the sales were disclosed to the market because they were financially material.

In this case, the 90,000 domains will cause a 37% uptick in MMX’s total registration base, if you exclude .vip from the portfolio.

The names are not registry-reserved, and are not premium-priced.

It works out to about $5.55 per domain, which is a first-year discount MMX agreed to with the undisclosed registrar that brought in the business. If they renew, they will renew at whatever the standard renewal price is at the time.

Hall said he did not know exactly when the domains will be registered, but MMX’s statement to the market said that it would be within the next 12 months.

Quite how the buyer can commit to buying 90,000 names without even knowing whether the names it wants will be available when it comes to register them, I’m not sure.

It’s all a bit mysterious, but my gut feeling is that we’re probably looking at one of those networks of low-quality, machine-aggregated, niche-content portals that spring up from time to time.

Previous efforts linked to the gTLD industry, such as Zip.pro and Socium Networks, haven’t exactly set the world alight.

But it this case it appears to buy a genuine third-party buyer, not a registry front.

Hall said that he was unaware of whether the buyer has also made large-scale purchases from other registries that do not have the same disclosure requirements, but said it was certainly possible.

.club premium sales approaching $5 million

Kevin Murphy, April 11, 2017, Domain Registries

.CLUB Domains sold half a million dollars worth of reserved premium names in the first quarter, bringing its cumulative to-date total to almost $5 million, the registry reported at the weekend.

Q1 sales were $505,139, the company said, bringing its total since launch to $4,844,428.

There were 475 premium sales in total, sold via auctions, registrars and aftermarket platforms, it said.

Headline sales in the period included seniors.club and pet.club for $18,000 apiece, and photo.club for $10,000.

The numbers may indicate that its broker program and financing options, introduced in January, may be taking off.

The registry’s Q1 sales amount to more than half of what it sold in the whole of 2016.

More sales figures are available in the .CLUB Domains blog post.