Registries can jack up prices, but they must give notice.
One issue many people think may be a ticking time bomb with consumers and new top level domain names is a lack of price controls. I was reminded of this today by some comments on another post.
Most existing gTLDs have restrictions on how much the registry operator can increase prices each year. New TLDs don’t. Here’s the contract language:
(b) With respect to renewal of domain name registrations, Registry Operator shall provide ICANN and each ICANN accredited registrar that has executed the registry-registrar agreement for the TLD advance written notice of any price increase (including as a result of the elimination of any refunds, rebates, discounts, product tying, Qualified Marketing Programs or other programs which had the effect of reducing the price charged to registrars) of no less than one hundred eighty (180) calendar days. Notwithstanding the foregoing sentence, with respect to renewal of domain name registrations: (i) Registry Operator need only provide thirty (30) calendar days notice of any price increase if the resulting price is less than or equal to (A) for the period beginning on the Effective Date and ending twelve (12) months following the Effective Date, the initial price charged for registrations in the TLD, or (B) for subsequent periods, a price for which Registry Operator provided a notice pursuant to the first sentence of this Section 2.10(b) within the twelve (12) month period preceding the effective date of the proposed price increase; and (ii) Registry Operator need not provide notice of any price increase for the imposition of the Variable Registry-Level Fee set forth in Section 6.3. Registry Operator shall offer registrars the option to obtain domain name registration renewals at the current price (i.e., the price in place prior to any noticed increase) for periods of one (1) to ten (10) years at the discretion of the registrar, but no greater than ten (10) years.
In other words, new TLD operators can raise their prices to whatever they want as long as they give the registrar 6 months’ notice.
Unfortunately there’s no requirement I can find that the registrar pass this information along to the registrant. But if history is a guide, the registrar will give some sort of heads up to registrants that the price is going to increase and suggest they they renew early for up to 10 years.
This provides some level of protection to registrants. Even if the price gets jacked up you can use the domain at current prices for up to a decade.
Registries can increase the price annually with only 30 days notice for as much as they increased it within the previous 12 months. For example, if .guru increases its wholesale price by $5 next year, it doesn’t have to give 6 months’ notice to raise it another $5 in the subsequent year. (Note that most gTLD contracts to date have percentage increases. The new TLD contract language suggests the maximum increase without 6 months’ notice is the same nominal amount, not percentage.)
Let’s think about this practically.
Is .guru going to raise renewal prices to $500/year in 2015? That would be a poor business decision. Most people would let their domains drop. Some would renew for a decade. The registry wouldn’t see much revenue from it and would lose in the long run.
The more likely scenario is that registries layer in small increases each year once their domains get established. They’ll offer discount programs for first year registrations and slowly increase renewals. They want to keep their registration base, not lose it.
I don’t like the lack of price caps. For some registry out there, it’s going to make sense to do a hefty price increase at the expense of a “locked in” consumer. That’s why you should consider the registry operator when selecting domain names.
That said, it’s important to understand exactly what is allowed and the requirements for increasing prices.
Andrew,
You are correct but registries like .CLUB put in an price protection for 5 years in the registry-registrar agreements limiting us from raising the price more than inflation or 15 percent over the entire period. We think it is important to ensure stability of pricing.
Colin
Thanks for pointing that out, Colin. It gets back to what I was saying — you should consider who the registry is behind a TLD and what their plans are.
@Colin Campbell: Evidence? I looked and could find none. In fact, https://www.icann.org/sites/default/files/tlds/club/club-agmt-html-redline-08nov13-en.htm says: “Intentionally omitted. Registry Operator has not included commitments, statements of intent or business plans provided for in its application to ICANN for the TLD.”
(FYI, I have a client interested in a .xyz for their main business (including @.xyz email addresses) and AFAICT, there are no price caps. I’m suggesting they steer clear, or accept the risk, and consider registering for 10 years off the bat, if they take the plunge at all.)
Other gotchas: “…deleted or expired gTLD domain names[:] a one-time restoration fee of $50 per domain name will be charged in order to restore ownership, plus additional renewal fees if applicable. Restoration fees for .XYZ, .WIKI and .INK are $75.00 in addition to any renewal fee.”
(seen at uniregistry.com/pricing)
nTLDs that benefit from a large number of speculative registrations would hurt themselves most by steep price hikes. Someone who owns only 1 nTLD for the sake of an established business (whether that domain is in use or warehoused for brand protection) will probably roll with the punches and renew even with a 10% or 20% price increase — maybe without noticing. But domainers who have registered multiple nTLDs would notice the price hikes acutely, drop domains like hot potatoes, and rapidly spread the word through blogs and forums.
Something similar applies to registries who have sold multiple nTLDs to particular companies. Think Donuts. Conceivably, an accountant might notice that the bill for those 20 or 200 domains is growing exponentially and recommend cutting back. However, there’s less personal accountability and more waste when it comes to companies — especially the large companies that warehouse scores of domains for brand protection purposes. It’s more work for an accountant to point out a problem than to ignore it. So registries can probably raise prices 10% or 20% annually with little ill effect when it comes to big companies. Those same companies have also purchased more domains prior to general availability at higher prices, which shows that cost savings are not really their priority.
Ironically, the nTLDs that are most successful with end users will be the same nTLDs where price hikes are most likely to occur. Suppose, for example, that .PHOTOGRAPHY or .FOUNDATION domains were mostly being developed into primary websites and were just expensive enough to keep the speculative domainer purchases to a minimum. (I’m not saying this is the case.) The registry would then be much more successful by most standards — websites popping up, few domains held by resellers, etc. And, by the same token, their entrenched, evangelist end users would find it much more difficult to abandon the domain they’ve built on. So price hikes, at some point, are sure to be tempting for a registry with a high website / speculator ratio. End-user adoption increases the probability of price hikes.
I agree 100%.
However, this discussion must not be had without editorial condemnation of such practices. The setup is not benign; this is not proper domaining; it’s not orthodoxy. It’s up to us to say no, on top of our voices.
As an end user, I have registered multiple domains with this exact issue in mind. In the event that domains are priced out of reach, I will simply fall back to my primary domain (a .com) if need be. If these extensions play out the way I expect them to do over the next 5-10 years I look forward to expanding them…but the .com will remain primary until I can be certain…
1. The domains are stable (they continue to exist, pricing is consistent, no surprises)
2. The domains are beneficial (search engine friendly/customer retention)
…I will be looking at spreading my website across 50 domains, but can change every url in a minute to point elsewhere (eg the .com) if need be.
The smart move is not to increase the price, it is to increase the end user base and price increase is counter productive to that, especially with 100s of new extensions hitting the market.
Unless you are specifically aiming to be an elitist brand (.rich or .luxury for instance) obviously
Is this the same thing as what has happened at 101domain.com?
They allowed people to register a load of domains for $12.99 and then hit them with bills about six weeks later for literally thousands of dollars or else they were going to take the domains off them. (story: http://www.domainsherpa.com/discussion-20140424/)
With this case in point, do domainers need to prepare for companies being able to demand thousands of dollars with no warning like this with all new domains?
My impression of the 101Domain case (which I haven’t followed closely) is that it’s probably a mistake due to carelessness. Correct me if I’m wrong about the details: They sold domains below the registry’s asking price and then, rather than taking the hit themselves, asked registrants to pay the difference. Understandably, that caused a backlash. And even if 101Domain subsequently worked things out with those registrants (I have no idea whether they did or not), the PR damage was already done.
I’d read this as a mistake on 101Domain’s part rather than something deliberate. They’ve lost money as a result of the bad PR. And they surely would have anticipated that negative fallout except in the case of an accident.
There’s one thing these Registrars and Registries lack, that they covet, and that is Domain Bloggers; if they know that Domain Bloggers will NOT tolerate some of these excesses, they wouldn’t even attempt a snatch back of those names, or higher fees, they would have eaten them.
These Registries/Registries believe they can have, either the silence of the more disciplined bloggers, or the tacit approval of the terrible ones, on the cheap by running a few dollars a month ads with them; they feel they can do anything thence.
If they know that Bloggers will scream on top of their voices for 12 months for each wrong doing, they will play fair.
End-users don’t read domain industry blogs. Domainers do. Over and over you pointed out that new gTLDs are of no interest to domainers, what difference would make domain blogs bashing out new gTLDs or celebrating new gTLDs ? Domain industry blogs cover new gTLDs not because they like or dislike them, but because they are the source of most news in the TLD world nowadays and for the next year or two. After that they won’t be even called new gTLDs anymore, just TLDs…
@Kuhl,
You are right, with one omission, I have also pointed out that Domainers are in fact, wittingly or unwittingly, the End-Users of the new gTLDs.
And one caveat: I have never seen anyone predict a stillborn for the new gTLDs. I believe the new strings are born in the intensive care unit, as was predicted.
How bizarre then for their parents to banish (as in ostracize) the Doctors?
Just to disagree…
End user right here.
@Jane,
I could’t quite make out who you’re disagreeing with, if it is me, I count you as a domainer because of the following statement you made above:
“2. The domains are beneficial (search engine friendly/customer retention)
…I will be looking at spreading my website across 50 domains, but can change every url in a minute to point elsewhere (eg the .com) if need be.”
You are operating 50 domain names, then you are a domainer. There’s nothing that states that developing your names disqualifies you, au contraire!
End users are clueless to the companies operating such registries. They cannot tell a donut, from a godaddy. Nobody reads all those terms page, naive or not, they will be increasing prices, and putting the screws to you.
If club has it in writing they are holding steady for 5 years, good on them, but they also have 6000 names at sedo, some of them in 6 figure asking prices, so it reverts back to pricing it in on the sell.
Just FYI I have not seen any good faith on the part of majority of GTLD operators to date, many have manipulated many early statements made to ICANN, and consumers. For that reason I see very little for many of them to stick to their word going forward.
Andrew has opened a huge can of worms these guys tried to keep shut, and turn the cheek on, he is the first to expose this on a pure article. It is time they address such concerns. ICANN really F’D UP this fine print going forward,t hey should have really held their feet to the fire when they had a chance, like capping it at 3% per year, with no more than 5 increases per decade etc…
This has the potential to be outrageous
Keep in mind, registries are being pulled in several directions at once. A few registries may go off the deep end, but others will be forced to maintain some equilibrium.
Price increases on any ongoing service — whether that’s your monthly phone bill, the price of gasoline, or an annual domain renewal — are always tempting for companies. But as they increase those prices, customers with other options tend to go elsewhere. Where there is mobility and free competition, price hikes are kept in check. Domainers aren’t locked into renewing a .GURU or a .VENTURES. If the registry goes nuts, then domainers will spend their money on some other domain instead of renewing.
The cases to worry about are the high-end-use nTLDs. A photographer invested in .PHOTOGRAPHY isn’t as mobile — i.e. as free to drop the domain and rebrand.
I’m not too concerned about this from the domain investor standpoint. We’ve got hundreds of TLD choices to bet on and can always take our money elsewhere. Rational registries know that.
Having a large proportion of domainer registrants acts as a deterrent on nTLD price hikes — something for which mainstream businesses ought to be grateful (but for which they won’t be). A healthy extension needs price caps — either in the form of ICANN contracts or a large deterrent domainer presence.
I’m more concerned about the end users who invest in nTLDs without domainers alongside them for safety — especially when it comes to those registries with low registration numbers and net losses to compensate for.
The trouble is that the domaining community isn’t necessarily looking out for one another. If i am screwed out of a renewal, chances are you’re going to drop-catch the same domain name so the registries don’t really loose any money.
Equilibrium’s work in perfect competitive environments. In situations where one man can sit on a $40MM hoarding fund, what stops the registries from tempting his bite as he obviously values domain assets more than the average buyer?
I think the day registries got into aftermarket sales was the nail in the coffin. Yes ICANN could have done something about it but choose to leave it to the free market. I guess they figured that with all the so many extensions, cannibalization will happen and registries with emotional intelligence will survive.
The irony is that the captive; in this case the guy with the .photography will have to cough up all get screwed.
My experience******************************
I know this because I was once on the receiving end of such blatant thievery from 1and1. Here is how it happened. They sent me a christmas offer on the 23rd December, I buy in bulk about 300 domains, I turn off auto renew just so I can have the time to cherry-pick and drop irrelevance.
I get an email about a month before my registration expiry but I run my own portfolio management software which remind me the specific renewal dates.
I login on the 24th and the domains are no longer available for renewal. Infact, they are on the aftermarket being sold by someone in Germany a block away from 1and1 offices…bam no warning on expiry, no standard practices we are used to at go daddy or yahoo registries, no drop period. The domain just transferred from my account to some domainers account next day…the answer? Read your terms of service.
So I choose not to purchase any of the 600 pre-registrations I done with 1and1 or do business with them ever again. But I bet you that won’t stop you from buying from them…my 2 cents.
With only inbound.link to worry about, Andrew, you’re in good hands at Uniregistry. 🙂
Domainers calling themselves end-users are bizarre. An end-user is someone who was an actual content or service to be provided on a domain, not someone with a parked page to drag out SEO or to sell the domain. Content farming is to web what spam is to e-mail, and that’s not what the Internet is all about.
@Ruebens
You are off topic, I understand you stand to profit from GTLD’s rollout, but the topic is the lack of conversation from the registries from price increases going forward. I have seen the same convo on The Domains, and even MB just says well you have 6 months to renew for 10 years, but that does not answer the underlying question at hand, that nobody really wants to address.
This is where the GTLD’s are a LIABILITY, going forward.
It is good to see 50 cents couldn’t attend his own son’s high school graduation, but will be at the .club party, really the type of roll model you want endorsing your company.
Since I work for a non-profit gTLD applicant, you might be taking our goals different from what they really are… we see reducing arbitrage as a mean to achieve relevance. A TLD full of “this domain for sale” or parked click ads is not relevant; a TLD with actual users providing actual content and services is a relevant one.
The message was a response to Domennclature.com reply above where he or she claims a domainer is an end-user.
If you consider new gTLDs a liability since they lack price caps, you are welcome to not register those and keep registering TLDs that have price caps.
@Kuhl,
Definition of END USER. : the ultimate consumer of a finished product.
If domainers are primarily interested in SLD or Keyword names, and the Registries know this, and they priced the names at hundreds to thousands of dollars, per Registration/Renewal, surely they don’t expect those names to be resold by the domainers to third parties; they priced the domains at what they feel is fair price for the ultimate end-user, as you mentioned in an earlier response. Why are surprised? You said “So you are outraged that someone sells a name for its real value instead of a reg-fee and letting a domainer sells that same name for that same amount ? Not liking new gTLD for the lack of arbitrage opportunities is OK, because that’s how it really is. But it’s not something domainers were entitled to have, and not something that deserves outrage or protest. Don’t like them ? Don’t buy them. Let end-users buy them”.
That comment speaks for itself. Surely, the author feels that Domainers should be end-users, and that author is you, Kuhl.
On reducing arbitrage, I think you mean replacing it; domainers with Registries. The names are still for sale, they are still parked. Only variable is who.
Registries pay ICANN $180,000 and they are given a license to go to town on the end-users, acting as the arbitrageurs, profiting by exploiting price differences.
The only recourse available to domainers is NOT only abstain from participating, we have freedom to criticize it, protest it, and demand a correction. It’s up to us.
Old saying: “A Wolf in Sheep’s clothing is still a Wolf”. Telling yourself you are an end-user doesn’t make you one.
Domainer talking about price caps is funny.
@Andrew Allemann: you say, “Most existing gTLDs have restrictions on how much the registry operator can increase prices each year. Where can I find (e.g. in a table?) specifics: which existing gTLDs have what restrictions on how much the registry operator can increase prices each year? (Also, what makes them binding?) (Ditto for nTLDs.)
Matthew, I am not aware of such a list but i think it would be a good idea. In the case of .CLUB we have a 5 year agreement with the registrars stating we can not increase prices essentially beyond inflation. This does not restrict the registrars but does restrict the registry.
Colin
Ah, the agreements are registry-registrar, not registry-icann. Ok, where can I find a copy of those agreements online? e.g. the one with namecheap?
Matthew,
Those contracts are considered confidential and have but I have cut and paste the relevant clause for your reference.
9. Fee Increase. Registry Operator reserves the right to increase the Fees set forth above prospectively upon six months advance notice to Registrar. During the five year period subsequent to the date that Registry Operator signs its Registry Agreement with ICANN, Registry Operator shall not increase any individual fee set forth in Exhibit E more than 15% or the U.S. Currency Inflation, whichever is greater.
if i understand well, It looks like registrars protect customers against outrageous price hikes. If i understand the clause, it means that increase can’t exceed 15% during a 5 year period time or greater if US currency inflation increases more than 15% during a 5 year peiod time. Am i correct?
That is correct. .CLUB has voluntarily set up a clause to restrict ourselves from raising pricing more than 15 percent or inflation in a 5 year period. I am not certain but think we are the only registry to have done that.
Ultimately though market forces keep pricing down.
I’ve noticed individual pricing on new gTLDs – certain words are more valuable, so prices for the same .whatever can range from $20 up to $xxxx or posible more. Given individual pricing, and no caps on price raising, what’s to stop a register from blackmailing a successful company for their domain name if it became successful? Imagine the same situation existed for .com domains, what’s stopping the registry from charging Google or Facebook even tens of millions dollars A YEAR to keep using Google.com or Facebook.com?
Wouldn’t basing your long-term business plan on a domain name that is merely rented, with no rent control, and a landlord who could selectively target you, lead to some very unhappy consequences?
very clever article. I thought about the .host. If major web hosting companies move to .host and they can be forced to pay outrageous tld prices after they are hooked. We know that .host will only target businesses, so entities that make money. They may get hooked if the link juice goes to their .host account, at some point businesses have to pay for their main domain. I have bought several .host and i will come back to .com for safety. I don’t want to get trapped in 2,3,4,5 years…