.org back-end deal will come up for re-bid, PIR says as it acquires four new gTLDs

The industry’s most lucrative back-end registry services contract will be rebid, Public Interest Registry said today.

The deal, which sees PIR pay Afilias $18.3 million a year to run .org, according to tax records, will see a request for proposals issued in the back half of 2023, according to PIR.

Given that’s two years away, it’s strange timing for the announcement, which came at the bottom of a press release and blog post announcing that the company is acquiring four new gTLDs, three of which belong to Afilias’ new owner, Donuts.

PIR said Donuts is to transfer control of .charity, .foundation and .gives, which will be “reintroduced” to the market. .foundation currently has about 20,000 registered domains; the other two have a few thousand each.

It’s also acquiring the unlaunched gTLD .giving from a company called Giving Ltd.

All four are on-message for PIR’s not-for-profit portfolio, which also includes the barely-used .ngo and .ong for non-governmental organizations.

Those two gTLDs are getting decoupled, allowing registrants to register one without having to buy the other, PIR also said today.

The last time the PIR back-end contract came up for renewal, in 2015, Afilias was also the incumbent but increased competition — it was up against 20 rivals — meant that its slice of .org revenue was cut in half.

ICANN budget: staff bloat making a comeback

ICANN plans to ramp up its headcount starting next year to support the development of the new gTLD program.

Newly published budgeting documents show that average headcount is expected to rise to 406 for the year ending June 30, 2022, from 395 at the end of this June, with an even steeper increase to 448 a year later.

That’s after several years in which staffing levels have been fairly stable, even sometimes declining a little.

The main culprit is the Operational Design Phase for the next new gTLD round(s), which is expected to kick off soon.

ICANN expects to hire or assign nine people to manage the ODP before the end of June 2022, ramping that up to an average of 22 over the following year. The amount of non-ODP operational staff is expected to rise by 28 over the same period.

ICANN currently advertises 31 open positions on its web site, having added eight listings just this week.

This chart shows the expected growth:

At the time of the last new gTLD application round, in 2012, ICANN had 152 staffers, nine of whom were assigned to new gTLD project — and that was after the programs rules had already been developed, implemented and the application window opened and closed.

ICANN budget: no more new gTLDs before 2028

ICANN is not accounting for any revenue from a future round of new gTLDs in its just-published budget, which plots out the Org’s finances all the way through 2028.

The budget, which I gave a high-level summary of here, even predicts that dozens of 2012-round new gTLDs will disappear over the next six years.

The Org is predicting that there will be 1,091 gTLDs on the internet by the end of its fiscal 2027 (that is, June 30, 2028) down by 58 or 5% from July 2022.

Given that it’s only expecting to lose four gTLDs in FY23, this projection implies a speeding up of the rate at which gTLDs start cancelling their contracts or going out of business in the later part of the five-year budget.

The forecast comes with a big asterisk, however. A footnote reads:

These scenarios do not assume any further TLD delegations arising from the resumption of the New gTLD Program. While there is ongoing work and an intent to launch a subsequent round, the timing of its release remains unclear and potential impact(s) on funding indeterminate. Given this, ICANN org has deemed it prudent not to assume any prospective impacts from a subsequent round across the described scenarios.

In other words, ICANN is not yet ready to commit to a runway for the next application round, subsequent delegations and eventual revenue.

As I reported Monday, the next round is unlikely to be approved until the fourth quarter of next year at the earliest, and my view is that 2024 is the soonest the next application window could open.

I don’t think we can read too much into the fact that ICANN isn’t budgeting for any next-round impact on funding until after 2027.

If you’re pessimistic, you could infer that ICANN believes it’s at least a possibility that the next round could take that long, or not be approved at all, but the safer bet is probably that it merely lacks visibility and is acting in its usual risk-averse manner.

ICANN budget: mild optimism amid maturing industry

ICANN thinks the domain industry, including the new gTLD industry, is maturing and will continue to grow, in its just-published draft budget for fiscal 2023.

The Org is predicting growing transactions across the board, as well as an increase in the number of accredited registrars and a slowing decline in the number of contracted gTLDs.

ICANN is expecting funding of $152 million for FY23, which includes the $4 million bung it negotiated with Verisign as part of the deal to allow the company to raise .com prices.

That’s up from the $149.1 million is expects to receive in the current fiscal year.

As usual, the bulk of the funding comes from gTLD transaction fees — the taxes registrants pay through their registrars and registries whenever they register, renew or transfer a domain name.

Legacy gTLD transaction fees are expected to amount to $93.1 million, up 3% on a forecast of $90.1 million in the current year, while new gTLD transaction fees are expected to rise modestly from $9.5 million to $9.9 million, a 4% increase.

Transactions in legacy gTLDs are expected to be 201.2 million, versus 193.6 million in the current year.

New, post-2012 gTLDs are expected to process 25.8 million transactions, up from 24.8 million, of which 21.1 million will be billable, up from 20.3 million. New gTLDs only pay transaction fees after 50,000 domains under management.

ICANN is expecting to lose four registries in FY23 — this almost always means dot-brands that cancel their contracts — with the total declining from a June 2022 total of 1,149 to 1,145 a year later. This will have a modest impact on fixed registry fees.

But the Org is once again expecting to see an increase in the number of registrars paying fixed accreditation fees, up by 28 to 2,447 at the end of FY23.

Accompanying the budget, ICANN has published some industry trend analysis (pdf) outlining some of the assumptions behind the budget forecasts.

Basically, the document describes what regular readers already know — many domain companies benefited from pandemic-related lockdowns driving small businesses online, but overall industry volumes were driven down by low-cost new gTLDs experiencing huge junk drops.

For ICANN’s purposes, factors such as customer quality and pricing are irrelevant. A spammer registering 1,000 domains in bulk pays ICANN the same amount in fees as 1,000 small businesses building their first web sites.

The document reads:

Taken as a whole, DUMs failed to expand in the past twelve months ending in mid-2021. While this decline is at least partly attributable to lower promotional activity among some of the largest new gTLDs which could be reinitiated in the future, it nonetheless points to an industry that has shifted from a period of rapid expansion to one that is now witnessing steady maturation.

The draft ICANN budget covers the 12 months beginning July 1, 2023, and is now open for public comment before possible revisions and final approval.