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How much it costs to run a domain name registry

Not much, but some TLDs don’t have many registrations, either.

Frank Schilling’s Uniregistry registry is drastically increasing prices on some of its top level domain names.

Schilling told DomainIncite:

If you have a space with only 5,000 registrations, you need to have a higher price point to justify its existence, just because running a TLD isn’t free.

So how much does it cost to run a top level domain name?

For most registries, the bare minimum fees are quarterly fees to ICANN and fees paid to a backend registry services provider such as Neustar or CentralNic.

For names with fewer than 50,000 registrations, the ICANN fee is $25,000.

The price of backend registry services has been dropping precipitously, but many new TLD operators are still stuck in their original contracts. A small registry might pay $25,000-$50,000 a year for these services, although new contracts are being offered at much lower prices.

There’s also a small fee paid for registry data escrow.

So let’s call it $50,000-$75,000 just to keep the lights on if you run one top level domain.

This doesn’t include any of the operator’s time, cash marketing expense, etc.

There are also big economies of scale here. A company that owns multiple new TLDs already has a discounted plan with their registry services provider. Any personnel time and marketing can also be spread across these. In the case of Uniregistry, it runs its own registry so it’s expense there is the cost of its technical resources. My guess is this might be more than it would cost to outsource at this point.

At the end of the day, the incremental cost of holding on to one additional small TLD and not spending any time on it is about $25,000 a year.

You can see how a small TLD with a thousand or so domains not sold at a high price can lose money. Also note that I am ignoring all sunk costs, which are hundreds of thousands even for the worst strings.

The costs get quite a bit higher if a registry spends a lot on marketing, but they should also sell a lot more domain names.

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  1. Jan

    Frank’s desperation move is a black eye for all new TLD registries.
    Only way others can escape the collateral damage for New TLD perception among domain investors and AND end-users is if they demand that ICANN sets pricecaps on them.

  2. Josh

    My personal opinion has always been it was designed to be a pay day and done. Longevity be damned, make a buck off the dreamers and brand protection field then whatever. Sure there may be a few winners but longevity should never have been a realistic plan nor factored into the roi.

  3. Domainer

    “From the very beginning, this was always a pure money grab on the part of ICANN while justifying it by promoting a public demand that never existed”

    In the other thread, David Castillo pointed out the major, underlying problem. The only people making any money on the low volume tlds is Icann.

    If you were in the brick and mortar retail business. And your rent was sky high, it does not matter how much you sell. You are only one or two downturns away from going out of business. And, if you go out of business, the landlord turns around rents your space to someone else.

    Bottom line, Icann does not care about the supply chain (registry, registrar and domain user) once they have their money.

    What is the insult to injury, they do not even say ‘thank you’.

  4. Meyer

    There are 3 sound economic principles in play here.

    1. The law of diminishing returns. (price vs benefits)

    2. Price elasticity of demand. (higher the price – less demand).

    3. Product substitution (price vs different tld)

    Lets see if the economic principles hold true.

  5. Joseph Peterson

    Clearly, Frank Schilling overestimated where registration volume would be and underestimated the prices he’d need to charge in order to break even or turn a profit. In practice, many of these boutique nTLD keywords must be priced higher because there are so few buyers.

    OK. Flawed business model. Prices must go up if an nTLD like .GUITARS is to survive. But who should absorb the financial loss and inconvenience due to Frank Schilling’s bad strategy?

    Looks like Uniregistry is asking its earliest, most loyal customers to pay for Schilling’s misjudgment. If you’ve paid €12 year after year, from now on you must pay €350 annually in order to keep what you bought. Effectively, you’re stuck. Either way you lose. Uniregistry, meanwhile, made money while you were paying. They’ll make money if you’re extorted into the higher rate. Even if you drop the domains, Uniregistry can make money by selling what once belonged to you.

    The responsible thing to do would have been to grandfather old rates for pre-existing customers. Or to phase in that 31-fold increase over time. Even doubling the price every year for 5 years would be painful enough. Or to offer to compensate earlier customers by buying back what they’d been sold.

    Keep in mind, Schilling promised no price increases above inflation for the first 5 years. Moreover, he courted domainers specifically on podcasts, on blogs, at conferences, etc. So Uniregistry cannot offer the excuse other registry operators might resort to – that of raising costs in order to discourage “speculators” and encourage meaningful usage. Uniregistry, above all, can never say that. Not when Frank Schilling is a celebrity domainer. Not with North Sound Names withholding many of the best Uniregistry domains. Arguably this also was part of Frank Schilling’s flawed strategy, part of the reason why end-user adoption has been so slow, why registration numbers are low, and why ordinary registrants are being asked to foot the bill.

    If Uniregistry can’t find a way to run a sustainable business while also safeguarding its own customers, then the company ought to fail. Or, to be more precise, the underperforming nTLD registries ought to be shut down. Note: I’m not saying Uniregistry ought to close down .GUITARS and the like. Rather, I’m saying that Uniregistry ought to trim its own costs, let a few employees go, curtail bonuses and salaries, before raising costs on its pre-existing customers by a factor of 31 overnight. If no accommodation for customer interests can be made, then the registry is a failure and ought to close up shop.

    Bad business strategies entail financial losses. Watching an entrepreneur chase down his earlier customers and ask them to pay 30 times more than they already paid in order to cover his company’s shortfall – strikes me as pathetic.

  6. Brent

    Generally, operation cost for a registry should be nothing less than USD100,000 even for the smallest TLDs with single person operating whole TLD. If the TLD is brand and idle with limited closed registration, it should be nothing less that USD 50,000 as backend operator usually charge flat fee for brand TLDs. For none brand TLDs, registry backend operator mostly charge tier pricing, if you have small numbers, per domain cost is expensive. Hiking the price should help the TLD theoretically.

  7. samfrida

    Has anyone questioned strategy and execution applied for any one of the nTLD claimed to be unsuccessful? Pricing is NOT the answer….alone – there are tons of other opportunities outside of the channel and industry to push these TLD’s.

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