VeriSign States Domain Name Price Hikes Coming
VeriSign states 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 firm’s earnings call on Wednesday. During the 33rd minute of the call, Sclavos responded to an analyst’s question regarding 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,” stated Sclavos. Sclavos continued by saying there’s a six month notice period ahead of domain prices can increase. In other words, we can expect .com prices to increase ahead of 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. Counting 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 regarding $7, they will face increasing margin pressure and will have little choice but to pass the cost to clients.
Sclavos also stated 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,” stated Sclavos, the .net price increases are “by now 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 regarding the price increases other than to mount a public relations campaign. Still, you can’t blame VeriSign for wanting to increase prices. It’s a publicly traded firm trying to maximize profits. Registrars will complain regarding 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.
