VeriSign says it will hike prices on .com, .net domains in 2007.
The domain name industry knew it was coming, but VeriSign (NASDAQ: VRSN) CEO Stratton Sclavos dropped the bomb during the company’s earnings call on Wednesday. During the 33rd minute of the call, Sclavos responded to an analyst’s question about possible price hikes for .com domains:
“As it relates to .com, I think our expectation is that we’ll have some action here in the first-half of the year,” said Sclavos. Sclavos continued by saying there’s a six month notice period before domain prices can increase. In other words, we can expect .com prices to increase before the end of the year. VeriSign’s contract with ICANN allows it to hike the wholesale price of domains by 7% this year. That could mean up to a $.42 increase to $6.42. For a domain portfolio owner with 10,000 domains, that will be an extra $4,200 in expenses this year. This assumes domain registrars pass on the price increase, which is highly likely. Including ICANN’s $.25 per domain fee charged to registrars, the wholesale price of domains could reach $6.67. With a number of registrars offering domains for about $7, they will face increasing margin pressure and will have little choice but to pass the cost to customers.
Sclavos also said we can expect a hike in .net prices this year, likely in concert with the .com increases. Although wholesale .net prices are lower than .com, VeriSign can increase .net prices 10% this year. “In essence,” said Sclavos, the .net price increases are “already locked and loaded.” He also noted that the automatic renewal provisions in VeriSign’s contract to manage .net are even more favorable than those in the .com agreement.
It’s too late to do anything about the price increases other than to mount a public relations campaign. However, you can’t blame VeriSign for wanting to increase prices. It’s a publicly traded company trying to maximize profits. Registrars will complain about the price increases but it’s a two way street. When the wholesale price of .net domains dropped a couple years ago, very few registrars dropped their prices accordingly. In fact, leading domain registrar GoDaddy charges more for a .net domain than a .com despite the wholesale price of .net being less than .com.