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How Ethos Capital could restrict .org price increases

by — Policy & Law 15 Comments

The private equity firm says it’s agreeable to putting price caps into concrete agreements.

Logo for .org domain, featuring a blue circle with white letters spelling ORGNTEN, a group that represents non-profits, held a conference call today with a number of participants impacted by the Internet Society’s transaction to sell .org to Ethos Capital.

Ethos Capital founder Erik Brooks said that it is evaluating ways to put teeth behind its commitment to limiting price increases.

The firm will hold webinars in the coming weeks to discuss mechanisms to do this.

One idea that has been done by another registry is to cap prices in its agreement with registrars. .Club had such a term in its registry-registrar agreement; it limited price increases to 15% total or inflation over the first five years.

The challenge is how long this is enforceable. It’s one thing to restrict prices in an agreement that lasts for a few years. It’s another to restrict it in perpetuity.

November’s Top 5 domain name stories

by — Uncategorized 1 Comment

.Org dominated the news last month.

Image that reads "Top Five Posts" with the number five next to it

November was a busy month in the domain name business, led by a planned takeover of the .Org registry. I’ve grouped many of the .org-related articles into one on the top 5 posts list. Here’s the full roundup of what got the most views on Domain Name Wire last month:

1. Private equity company to acquire .Org – There are a lot of connections to ICANN including its former CEO. Ethos is buying a money printing press and many groups aren’t happy about it.

2. Why this weird domain sold for so much money – You have to understand Chinese to understand this domain name.

3. Kit.com is losing its domain name, switching to Kit.co – The woes of a domain name lease.

4. All domain investors should read this analysis – I can’t take credit for it.

5. Tucows exits its domain name portfolio – Citing changes in domain name monetization and the domain aftermarket, Tucows sells off its portfolio.

Miss any podcasts? Check them out here:

Richard Lau and James Morfopoulos – This episode got rave reviews! Listen

What to expect at NamesCon 2020 – It’s coming up next month! Listen

James Booth – James returned to the show to talk about what’s selling, what’s not, and what the future holds. Listen

ISOC is leaving money on the table with .org, but…

by — Policy & Law 12 Comments

A secretive deal was the only way ISOC could get a deal done.

Picture of two men holding cash in secret back room

I’ve written a lot about how Internet Society’s (ISOC) deal to sell the .org registry to a private equity company impacts the internet’s users and non-profits. From a credibility standpoint, it’s a bad deal for ISOC.

But from a financial standpoint, it makes sense for ISOC to sell the registry.

The registry throws off cash to ISOC each year but there is risk. There’s risk that the importance of domain names changes over time. There’s risk that the base of .org domains declines.

By selling the registry and creating an endowment, ISOC secures its future. And a $1.135 billion endowment is nice security.

The way the process played out, however, means that ISOC is leaving money on the table.

I’ve heard from multiple people who would have paid more. These are people who have the capability to acquire companies for over a billion dollars. A competitive bidding process would have led to a greater windfall for ISOC.

So why was the deal done without public consultation and not put out to bid? I suspect that if people caught wind of what ISOC was up to, the blowback would have been so big that the deal would have never gone through. This was a deal that needed to be consummated in secret.

From ISOC’s perspective, $1.135 billion is enough. Getting a few hundred million dollars more at the risk of not getting anything was too great.

 

ICANN says it “does not have authority” over .org transaction

by — Policy & Law 22 Comments

Domain regulator is unlikely to do anything about the sale of .org by a non-profit to a private equity firm.

Logo for .org domain, featuring a blue circle with white letters spelling ORGAnyone holding out hope that ICANN will block the sale of .Org to private equity company Ethos should prepare to be disappointed.

The company issued a statement to Financial Times saying that it “does not have authority over the proposed acquisition”:

Pressure is now mounting for ICANN to block the transaction. Since it involves a top-level internet domain, the transfer of .org to a new owner requires the agency’s formal approval.

In a statement to the FT, however, ICANN appeared to brush aside the calls for action, saying that it “does not have authority over the proposed acquisition”. Instead, it said its job was simply to “assure the continued operation of the .org domain” — implying that it could only stop the sale if the stability and security of the domain name infrastructure were at risk.

Whether the deal will be delayed by ICANN’s accountability mechanisms or other action remains to be seen. But I wouldn’t put money on it.

Ethos paid $1.135 billion for .Org

by — Policy & Law 22 Comments

Internet Society reveals the price it is selling out for.

Picture of U.S. currency falling from the sky

On a webinar today, Internet Society has purportedly disclosed that Ethos Capital will pay $1.135 billion to acquire the .org registry from it:

This was a savvy investment for former ICANN CEO Fadi Chehadé and Ethos Capital. Had .org been sold in a competitive process, it surely would have sold for much more.

At the same time, the deal makes financial sense for ISOC. It should earn a solid $50 million+ per year from its endowment, giving it stability without concerns to what might happen to its golden goose in the future.

The current wholesale price for .org is $9.93, bringing in around $100 million in revenue per year. Costs are approximately $25 million but can be dramatically reduced. If Ethos doubles the price, it will lose very few registrations and bring in nearly $200 million a year in revenue.

Let’s take Ethos at its word that it might, possibly, “potentially” just raise prices 10% per year. That’s more than what Public Interest Registry has done in the past, but it’s also what was allowed in the contract before price caps were removed.

At the end of ten years, that puts the wholesale price at $25.75. Assuming it still has 10 million domains under management, that’s $257.5 million in revenue and around $235 million in profit.

Per year.

Roll Donuts into it, take it public, and you get a nice payday.

More .Org Coverage:

Private Equity company acquires .Org registry

The interesting connection between the .Org deal and ICANN

The economics of .org domain names