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Winners and losers in the new .com pricing regime

Kevin Murphy, November 30, 2012, 16:08:42 (UTC), Domain Registries

Today’s shock news that Verisign will be subject to a .com price freeze for the next six years will have broad implications.
The US Department of Commerce has told the company it will have to continue to sell .coms at $7.85 wholesale until 2018, barring exceptional circumstances.
Here’s my initial take on the winners and losers of this new arrangement.
Domain investors
Volume .com registrants are of course the big winners here. A couple of dollars a year for a single .com is pretty insignificant, but when you own tens or hundreds of thousands of names…
Mike Berkens of Most Wanted Domains calculated that he’s saved $170,000 $400,000 over the lifetime of the new .com deal, and he reckons fellow domainer Mike Mann will have saved closer to $800,000 $2 million.
Brand owners
The other big constituency of volume registrants are the brand owners who spend tens or hundreds of thousands of dollars a year maintaining defensive registrations — mostly in .com — that they don’t need.
Microsoft, for example, owns over 91,000 domain names, according to DomainTools. I’d hazard a guess that most of those are defensive and that most are in .com.
There’s potentially trouble on the horizon for new gTLD applicants and existing registry operators. Verisign is looking for new ways to grow, and it’s identified its patent portfolio as an under-exploited revenue stream.
The company says it has over 200 patents either granted or pending, so its pool of potential licensees could be quite large.
Its US portfolio includes patents such as 7,774,432, “Registering and using multilingual domain names”, which appear to be quite broad.
Verisign also owns a bunch of patents related to its security business, so companies in that field may also be targeted.
Verisign’s registrars will no longer have to pass their cost increases on to consumers every year.
While this may help with renewal rates, it also means registrars won’t be able to sneak in their own margin increases whenever Verisign ups its annual fees.
IDN buyers
Another area Verisign plans to grow is in internationalized domain names, where it’s applied to ICANN for about a dozen non-Latin variants of .com and .net.
Those registry deals, assuming they’re approved by ICANN, will not be governed by the .com pricing restrictions. Now that Verisign’s growth is getting squeezed, we might expect higher prices for IDN .com variants.
ICANN may have suffered a small reputational hit today, with Commerce demonstrating it has the balls to do what ICANN failed to do six years ago, but money-wise it’s doing okay.
The new .com contract changes the way Verisign pays ICANN fees, and Commerce does not appear to have made any changes to that structure. ICANN still stands to get about $8 million a year more from the deal.
The Department of Commerce
Unless you’re a Verisign shareholder, Commerce comes out of this deal looking pretty good. It played hard-ball and seems to have won a lot of credibility points as a result.

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Comments (11)

  1. Andrew says:

    Another side of the brand owner equation is that increasing .com prices reduces typosquatting and cybersquatting. Hard to calculate how that shakes out, though.
    I agree on registrars not being able to sneak in their own price increases and blame in on ICANN. They also won’t be able to say “renew now before the price hike!”

  2. Mike’s math was incorrect, and understated the savings. See my comment in his blog. The actual savings is approximately $5.90 total per domain, over the next 4 years.

  3. Kevin: I assure you his numbers are NOT correct (I own, remember).

  4. Also, Mike originally calculated the savings over just the first 4 years. The savings over the lifetime of the contract (6 years) are actually almost double (because of the compounding effect). See my most recent comment on Mike’s blog.

  5. Philip Corwin says:

    Let’s add the Department of Justice’s Antitrust Division to the kudos list — all my info is that they led the charge to review the pricing provisions and take on increases absent justification.

  6. Michele says:

    I somehow doubt that big brand owners are paying “retail” rates for domains. They’re probably paying based on other criteria ie. as part of a larger contract with a corporate registrar.
    While a price increase on the wholesale end does impact retail and wholesale registrars’ pricing to their customers I’d be surprised if a few cents increase automatically translated into a direct price increase for a big brand that was dealing with a corporate registrar.

  7. Philip Corwin says:

    Michele — Without the price freeze .Com wholesale prices were going from $7.85 to $10.29 over the next six years. So it’s way more than a few cents we’re talking about. And, in fact, I had indications that managers of large defensive portfolios were looking to weigh in for a freeze if the contract negotiations had gone into overtime.

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