|
January 2014. The first registry contracts have been signed. The first Sunrise priority registration periods have been opened. The new gTLD program is well on the way.
So maybe now, at last, we can start to find out the real costs of opening up the Internet root? And how much revenue doing so has brought ICANN!
Short answer: ICANN has taken in USD 344.958 million from the first round of new gTLD applications. The figure comes from the first of ICANN’s quarterly financial statements, covering the three months up until September 30th.
With an initial 1,930 applications received, round one actually netted ICANN $359.994 million. But subsequent reimbursements at percentages of 80, 70 and 35 of the total $185,000 application fee meant that $15.037 million were handed back to applicants who, for one reason or another, had withdrawn their claim to a new gTLD.
So far, the program has cost ICANN $119.203 million, including $3.3 million for the team specifically tasked with handling the program, and a further $9.46 million for regular ICANN staff.
Little left over
But once the dust settles on this first round, ICANN actually estimates the program will end up bringing in $363.342 million thanks to additional fees charged for carrying out changes to applications. But costs are also set to increase as ICANN continues to process the round one applications. The organisation sees the program ending up costing it $204.283 million.
That would leave a surplus of $107.035 million, but in actual fact ICANN may end up being out of pocket to the tune of $3.065 million in accounting terms because of the significant funds it has to set aside to manage risks!
This obviously flies in the face of current expectations that ICANN would end up with more money than ways to spend it after closing the first round. Yet it’s a situation that was recently confirmed by ICANN Board Chair Steve Crocker.
Responding to suggestions that ICANN use its significant proceeds from the new gTLD program to support other actions, Crocker confirmed that the priority was to first pay for this ambitious drive to expand the Internet namespace.
“The first use of the revenues from the gTLD program will be to cover the expenses of the gTLD program,” he wrote in an email sent to a public list. “Although the revenues are quite a bit higher than originally expected, the expenses are too. It is not yet clear whether there will actually be any surplus, nor is clear how soon such surpluses would become available.”
One of the reasons many expect a significant surplus is the upcoming auction process. “What I’ve said several times is that the surplus, if any, generated by the gTLD applications and the proceeds, if any, from the auction process will be treated separately and not be folded into the general revenue stream,” Crocker added. “We have not made any decision about what to do with these funds.”
That’s because right now, no-one knows what funds there will be. “The reason we haven’t made a plan yet is because we don’t have any sense of the magnitude of the amounts we’re talking about,” Crocker confirmed. “Once we have a general sense of the amount we can move into a discussion of what to do with it and what mechanisms would be appropriate. Very different discussions will take place depending on whether the number is around $1MM, $5MM, $20MM, $50MM or $100MM.”
One thing Crocker did commit to is being transparent about whatever process ICANN ends up working through to assign the surplus, even though he is not at all convinced at this stage there will be one. “We will run a fully open process when the time comes,” he pledged. “Although I am strongly committed to making sure whatever surplus there is from the gTLD applications and from the auctions is curtained off and treated separately, I have a fairly conservative view of the likely amount.”
Sponsored byIPv4.Global
Sponsored byVerisign
Sponsored byCSC
Sponsored byWhoisXML API
Sponsored byVerisign
Sponsored byDNIB.com
Sponsored byRadix
Stéphane - Nice analyses and insight! Thanks!
Thanks Alex, glad you found the article useful.
Stéphane
Really?
Your going to repeat the company line?
“Very different discussions will take place depending on whether the number is around $1MM, $5MM, $20MM, $50MM or $100MM.”
How could they even bring up amounts like $1MM, $5MM even $50MM they should be taling a bout $100MM $250MM or $500M or $1 Billion.
There have only been a handful of new gTLD private auctions and they have averaged over $1M per and none had more than 3 applicants.
None involved Google Amazon Uniregistry or Famous Four.
There are over 200 strings still in contention.
Do the math
The amounts cited by ICANN are silly
Michael, I'm not repeating the company line. I am quoting Steve, because in the context of this story, surely what the ICANN Board Chair has to say matters. Whether you believe him or not is another story, and is up to you.
Stephane,
You say that ICANN may run a loss due to the “significant funds it has to set aside to manage risks!”
I would note that ICANN’s view of risk management is at an extreme end of the spectrum.
I’m not sure what risk could be uncovered that hasn’t been extensively discussed over the past 10 years. All applicants agree that they will not sue ICANN, as a condition of application. No-one who wasn’t a brand applied for a brand. Governments have wielded their power even to the point of flouting their own laws (e.g., .amazon).
So they will have a $100M+ surplus when this is all over, you estimate. The higher-value strings are more likely to end up at an ICANN auction, simply because “high-value” correlates very well to “lots of applicants,” and when you have a lot of applicants getting an agreement between parties becomes quite difficult. So my guess is that they’ll end up with many more tens of millions of dollars (if not a hundred or more). ICANN will probably end up more than $200M in surplus when all’s said and done.
Antony
Thanks for the insight Antony, very interesting.
Stephane,
None of us can predict whether this whole gTLD GAME theory (Google,Amazon,Microsoft,EveryoneElse) will be a .SUCCESS or .FAIL.
But one thing is predictable. 201 contention sets, affecting 600+ applications,including applicants Google, Amazon, Microsoft remain unresolved mired and deadlocked will currently have to go to ICANN’s Winner takes all,last resort auction sale and leaseback, now fast tracked for completion December 2014. 201 Portfolio matrix valuations,including $50M for .app alone, indicate up to a $1Billion “profit” for ICANN 2014 added to the programme projected actual “profit” of $107035.
So Simple Maths and a Simple Solution for a Californian not for “profit” accountable to no one.
Ring fence it. Round 2. Start 2015. your.brand .city .etc for free. Phil
Phil, The auctions are a problem, no question. They are a problem for smaller applicants, who may be defending innovative business models against gTLD heavyweights with so much cash that they can just steam-roll the smaller guys. But I would say they're also a problem for the bigger guys, who are in many cases being forced into a system that doesn't suit them either (if that wasn't the case, why would they have come together to create another auction process and run it prior to ICANN's?). Perhaps it's not too late for ICANN to tweak its auction plans... Or perhaps it is, I don't know.
But where did the money go? I see revenues of a third of a billion dollars, refunds of $15 million and staff costs of about the same. Then an assertion that the rest of the money has been spent but not on what.
This does not look to me like transparency.
Well...the evaluation panels weren't free. A typical application would have gone through a background screening plus 6 other panels (Financial, Technical/Operations, Geographic, String similarity, DNS Stability, and Registry Services) all of which were outsourced to third party firms. Then consider a third party PDT service provider, the potential for outside legal counsel to deal with contracting, funding of the Independent Objector, etc...and it starts to add up. I assume those costs will be somewhat detailed in the financials.
I want to see what third party firms are getting and what they are doing for that much money as well as any personal relationships between ICANN staff and BoD. After the years I've spent dealing with ICANN mailing lists, the GA, ICANN's lack of transparency, BoD relationships to telecommunications companies, etc. I highly doubt that money is being doled out in a legitimate and transparent way. In addition to that, I suspect they are paying out way more than they need to for those third party services.