Company doesn’t bake price increases into guidance.
That compares to $1.232 billion in 2019.
The numbers could be better if Verisign enacts a 7% increase in the wholesale price of .com domains next year, as it is likely to do. ICANN has proposed allowing the company to increases prices beginning in 2020. Any price increase would take place later in the year, though, and the impact is difficult to measure without knowing when it will happen and how many domains will be renewed for the remainder of the year.
As part of the deal to enact price increases, Verisign is chipping $4 million a year into ICANN’s coffers. On the company’s investor conference call yesterday, Verisign CEO James Bidzos answered a question about what this money is for. Analyst Nick Jones of Citi asked for clarification on how this money will be used as if it will be used for special/additional projects.
Bidzos said “…ICANN’s core mission is security and stability and that’s where this funding is going…”
Verisign doesn’t show price increase in its guidance simply because there will be no price increase at all.
Good sense will prevail and something or someone will prevent those totally unjustified increases from happening.
Just like the California AG who stepped in and will derail the sale of .org to Ethos.
Time for all those legacy extensions .COM / .NET / .ORG to have their contract put up for bid.
“good sense will prevail”
don’t bet on that.
You’ll see Andrew, Verisign will be forced to “forget” those price increases.
A monopoly with 65.5% operating margins willing to steal more money from 146 million registrants will not go unnoticed.
The US government has already approved them.
Then don’t vote for Trump in 2020 and things will be just fine.
Unbelievable! Verisign is now has more profit per employee than any other technology company on the S&P 500. It generated more than $700,000 Net Income per employee in 2019.
This all stems from ICANN’s cozy relationship with Verisign and the anti-competitive .com Registry Agreement.
Keep in mind – Verisign’s wholesale price have been capped at $7.85 since 2012.
Even though .com pricing has been capped at $7.85 since 2012, Verisign still managed to triple its stock price and earn a distinction as the company with the highest income per employee among all technology companies on the S&P 500. Its revenues increased from $615 million to $1.231 billion, while its profit increased from $87.9 million to $612 million between 2009 and 2019 respectively. Its operating margins rose from 26% to 65.5% in the same period. This performance is directly attributable to its operation of the .com registry.
In other words, every new registration and renewal translates to pure profit for Verisign because its functions are entirely automated, and it need not do any additional work or provide any expanded services to register or renew .com domains. Through economies of scale, the actual cost has declined to $2.68 per domain and will continue to decline as the base of domains grows. The marginal cost of each registration is near zero.
Interestingly, Verisign’s actual cost of $2.68 includes stock-based compensation of $50.6 million paid to its executives in 2019. In other words, Verisign stock based compensation makes up $0.31 of the actual cost per domain of $2.68. Thus, Verisign’s true cost is $2.37 per domain not including stock based compensation (which mostly goes to its top executives.)
But starting in 2020 – this situation is about to get a whole lot WORSE for consumers! ICANN, in private dealings with Verisign, proposed an early extension to the .com Registry Agreement, allowing Verisign to increase its prices by 31% over the next four years. Despite the fact that Verisign’s cost have declined since 2009.
And despite the fact that ICANN and Verisign previously agreed to cap pricing at $7.85 through 2024 to protect consumers.
ICANN agreed to this concession with Verisign behind closed doors – outside of the multistakeholder model, with no transparency whatsoever. ICANN simply announced it had already “reached a proposed agreement” and did not seek any stakeholder feedback.
ICANN, in exchange for handing Verisign billions in supracompetitive monopoly profits on a silver platter (Verisign will not need to do ANYTHING to increase wholesale prices), will receive a $20 million kickback from Verisign itself. Quid Pro Quo.
ICANN and Verisign are co-conspirators in the restraint of trade – which directly facilitates harm on 144 million registrants.
There is absolutely no justification for higher prices. The only party that wants this higher prices is Verisign. Nobody else wants to pay more money for a service that actually cost less. And ICANN – in bed with Verisign – allowed this to happen at the detriment of 144 million worldwide registrants. The financial interest of one-for profit company ahead of 144 million registrants.
Even though the early extension agreements are out for public comment – it is clear to everyone that ICANN has already made up its mind and will reject all feedback. After all, this is exactly what ICANN did 8 months ago with the removal of all pricing caps in the .org domain extension. ICANN ignored more than 3,200 public comments and almost 100% unanimous opposition – and executed the agreements anyhow.
The entire industry should be up in arms with this cozy relationship. A relationship that continues to facilitate overcharge and harm on 144 million .com and 10 million .org registrants throughout the world.
ICANN is no longer a good steward of the Internet. It is allowing monopoly operators – who have the automatic presumptive right of renewal – to raise prices on its captive base of users.
Where is the US Department of Justice Antitrust Division? Where is the US Federal Trade Commission? Where is the European Union?
Does anybody see anything wrong with the economics below?
Verisign’s costs have been going down since 2009:
2009 – $455,989,000
2010 – $448,295,000
2011 – $442,589,000
2012 – $416,265,000
2013 – $436,855,000
2014 – $445,690,000
2015 – $453,420,000
2016 – $455,595,000
2017 – $457,373,000
2018 – $447,577,000
2019 – $425,534,000
Yet, ICANN is about to allow Verisign to increase its prices over the next four years by 31% on 144 million registrants?
Verisign’s operating income have increased dramatically:
2009 – $159,958,000
2010 – $232,283,000
2011 – $329,389,000
2012 – $457,327,000
2013 – $528,232,000
2014 – $564,427,000
2015 – $605,946,000
2016 – $686,572,000
2017 – $707,722,000
2018 – $767,392,000
2019 – $806,127,000
This operating income expansion occurred while prices have been capped at $7.85 since 2012.
Why should Verisign be given the ability to increase its prices by 31% over the next four years through 2024?
$806 million in operating income not enough?
Verisign employees fewer employees than ever before:
2009 – 1,100
2010 – 1,048
2011 – 1,009
2012 – 1,099
2013 – 1,079
2014 – 1,061
2015 – 1,019
2016 – 990
2017 – 952
2018 – 900
2019 – 872
When a company decreases headcount – expenses go down.
Again, what is the justification to increase prices by a staggering 31% over the next four years?
(despite the fact that ICANN and Verisign agreed to cap prices at $7.85 through 2024 to protect consumers.)
ICANN – why amend the .com Registry Agreement more than 4 years early?
Bidzos said “…ICANN’s core mission is security and stability and that’s where this funding is going…”
Its a bribe.
And not only that, his being adamant on it is clear he knows he needs to cover this bribe up, so he needs to be very careful to tell people “that’s where this funding is going”. The .com price increase is ONLY going up because of this bribe.
Most important, Verisign’s bottom line performance has been remarkable.
Verisign’s Net Income:
2009 – $87,931,000
2010 – $58,152,000
2011 – $141,141,000
2012 – $322,728,000
2013 – $323,953,000
2014 – $355,347,000
2015 – $374,241,000
2016 – $441,185,000
2017 – $457,760,000
2018 – $582,619,000
2019 – $612,489,000
ICANN’s thought process:
Sure – let’s give a monopoly operator – with the presumptive right of renewal – to operate .com in perpetuity – a 100% unjustified price increase. Lets force 144 million worldwide registrants to spend more money, because they are held hostage and locked-into their domains, and funnel billions of dollars into the pockets of one for-profit company.
Oh, and lets also remove all pricing caps in the .org domain extension. Lets allow its operator to charge whatever amount they want – on a captive base of users, where substitutes do not exist. Let’s forget about the fact that price caps have been a very important tool to discipline pricing and to make sure the monopoly operator does not act opportunistically on its base of users.
Wow, I just looked and compared them to some of the biggest tech companies in the world… (Very quick research, not 100% on the numbers, but I did not leave any company out that I looked into.)
Verisign
872 employees
$612,000,000 net income
$701,834 net income per employee
Apple
123,000 employees
$55,260,000,000 net income
$449,268 net income per employee
Facebook
44,924 employees
$18,485,000,000 net income
$411,473 net income per employee
Microsoft
144,000 employees
$39,200,000,000 net income
$272,222 net income per employee
Netflix
7,100 employees
$1,866,000,000 net income
$262,816 net income per employee
Adobe
22,000 employees
$3,620,000,000 net income
$164,545 net income per employee
Salesforce
10,000 employees
$1,110,000,000 net income
$111,000 net income per employee
Google (Alphabet)
103,549 employees
$10,670,000,000 net income
$103,043 net income per employee
Comcast
184,000 employees
$11,730,000,000 net income
$63,750 net income per employee
GoDaddy
9,000 employees
$154,000,000 net income
$17,111 net income per employee
Verisign is nearly double the next highest company in this list. As a monopoly. And now ICANN is considering price increases on top of this?
Why do they need a raise?
Why did ICANN ignore US Department of Justice recommendations?
— ICANN should require competitive bidding for renewal of a gTLD registry agreement, rather than granting the incumbent operator a perpetual right to renew without competition.
— In particular, competitive bidding prompts bidders to propose and accept registry improvements, higher operating standards, and lower registration fees to win the contract.
— Indeed, competitive bidding has resulted in lower domain prices and higher operating specifications than what ICANN has achieved through non-competitive negotiations.
— Experience with the .net TLD and other gTLDs have showed that competitive bidding in the award of gTLD registry agreements, and periodic rebidding, has served as an effective tool for managing the interest of registrants in gTLDs.
— ICANN’s request for bids should expressly call for bids to specify an internal maximum price that would be charged by the operator for domain registrations, as well as limitations on price increases over time.
—————————-
Quite telling what the US Department of Justice Antitrust Division said about ICANN:
**** To date, we believe that ICANN has not come close to fulfilling its obligations to employ competitive principles in its management of TLD registry operations.
**** ICANN’s approach to TLD management demonstrates that it has adopted an ineffective approach with respect to its obligation to promote competition at the registry level.
People seem to forget that the .com price raise, different from the .org price cap removal, was in fact approved by the US government, not ICANN.
ICA and some registrars are pushing for public comments on the proposed price hikes, and while I’m not trying to discourage that in any way, past public comment periods have shown themselves to be largely ineffectual at achieving anything.
Perhaps instead, someone should alert the California Attorney General’s office to the pending price increases, since they are now already actively investigating the PIR/.Org deal. Maybe their attention needs to be brought to this issue as well, since they may not be aware of it, and that would add some heat and additional scrutiny onto ICANN to sway the odds in a meaningful way.
Public comments have no teeth, whereas under the California Code for Public Benefit Corporations, the Attorney General is able to bring about legal action to, “remove from office any director in case of fraudulent or dishonest acts or gross abuse of authority or discretion with reference to the corporation or breach of any duty …” and to hold a corporation subject to examination, “to ascertain the condition of its affairs and to what extent, if at all, it fails to comply with trusts which it has assumed or has departed from the purposes for which it is formed.”
ICANN, on their own website, under their announcement when they moved to the multistakeholder model, have pledged themselves to be, “empowering the global Internet community to have direct recourse if they disagree with decisions made by ICANN the organization or the Board.”
It’s clear that anyone but Verisign would disagree with the price increase, so where is this alleged direct recourse coming from? All their talk of bottom-up consensus is not reality.
I’m not one to look to government for solutions, but whereas ICANN only pays lip service to the idea of community, I see them as being an out of control bureaucracy who can only be put in check by someone higher up in the bureaucratic food chain.