Nominet's price rise for UK domains will cost businesses
over two hundred million pounds extra in the next decade
By Edwin Hayward
NOTE
An Excel sheet containing the data behind this report can be downloaded from
http://www.mydomainnames.co.uk/registry_old_new_prices.xls
SUMMARY
From 1 March 2016, UK domain registrants will have to pay close to £21,000,000
more every year for their domain names. This is as a result of Nominet increasing the
wholesale price of domain registrations, and retail registrars following suit with their
own price rises (over and above the increase attributable to Nominet).
This price rise will push the average cost of owning a UK domain name up by 48%,
and net Nominet (a not-for-profit organisation that already makes a hefty annual
surplus) an additional hundred million pounds over the next decade, all while
imposing a drag in excess of two hundred million pounds on UK businesses.
INTRODUCTION
Nominet is the organisation responsible for managing domain registrations in the UK1
(such as the extensions .co.uk, .uk and .org.uk). Their role as guardian of the UK
"namespace" can be thought of as being broadly similar to that of the Land Registry
for properties. As of the end of January 2016, Nominet managed 10,660,818 domain
registrations2.
Most domains are sold via registrars: intermediaries that pay Nominet a wholesale
rate for each domain, adding a mark-up to arrive at the price the end consumer pays.
A small minority of domain registrations (an estimated 10%) are sold directly by
Nominet to “self managed” partners who register the domains for their own use. All
the rest are sold through registrars.
Although thousands of companies are accredited to resell domains, just 35 large
registrars control 76% of all domain registrations.
The HEG group (main brands 123-reg, Heart Internet, TSO Host, VidaHost and
Domain Monster) is responsible for an estimated 2,695,002 domain registrations, or
25% of all domain registrations. The group of 1&1/FastHosts is responsible for
1,918,384 domains or 18% of all domain registrations. The other 33 companies make
up the balance of this 76%.
Because these huge firms sell so many of the domains in use in the UK today, it’s
their pricing decisions that will most affect what businesses have to pay to register or
renew their domains.
1
2
http://www.nominet.uk/about/
http://www.nominet.uk/news/reports-statistics/uk-register-statistics-2016/
Interestingly, the way Nominet has structured its voting system is based on the
number of domains under management (subject a 3% cap) so these same 35
companies carry a hefty majority of votes and can effectively rubber-stamp any
decisions made by Nominet.
THE WHOLESALE PRICE RISE
Nominet has announced that the wholesale price for domain registrations and
renewals is to increase by 25p on 1 March 2016. At the same time, the substantial
price break for 2-year domain registrations, in place since 1999, will be retired.
The headline effect of this decision is to raise the price of a 1-year domain registration
from £3.50 to £3.75 (a 7% price rise).
However, in practice, almost nobody registers domains at this price.
Instead, the vast majority of registrants who register directly with Nominet pay 2
years at a time; indeed Nominet’s own shopping cart system defaults to a 2-year
period.
With the elimination of the price break for 2-year registrations, the wholesale price of
a 2-year registration will rise from £5 to £7.50 (2x the new annual price, since there's
no longer any discount). In other words, a 50% price increase.
The overwhelming majority of domain registrants who register their domains
directly through Nominet will experience a 50% price rise.
Now the 50% price increase applies to domains registered directly at Nominet, but
most domains in the UK are bought via third party registrars that act as
intermediaries. Thus, most consumers and businesses will experience an even more
dramatic price rise, as outlined in the next section.
RETAIL DOMAIN PRICING AND THE EFFECT OF THE PRICE RISE
Registrars generally sell UK domain registrations at a mark-up, although some treat
them as loss-leaders to entice more customers towards their main service offering
(typically web hosting, or other IT services).
Amongst major retail registrars that sell domains for profit, current 1-year domain
pricing ranges from £3.89 to over £10, with most in the £4.50-£6 range. Their 2-year
pricing typically reflect some of the benefit of Nominet’s price break, ranging from
£5.58-£12.
Not all registrars have announced their new pricing yet, but all those that have seem to
have taken broadly the same approach: they have used Nominet’s price rise as an
pretext to raise their own prices even further.
For example, HEG group (all figures ex VAT):
BRAND
(WITHIN
HEG
GROUP)
123-Reg
Domain
Monster
Heart
Internet
TSO Host
VidaHost
Average
Old
1
year
price
£4.99
£4.99
Old
2
year
price
£6.98
£5.58
New
1
year
price
£6.99
£5.99
New 2
year
price
1
year
price
rise
£13.98 £2.00
£11.98 £1.00
2
year
price
rise
£7.00
£6.40
1 year
price rise
(postNominet)
£1.75
£0.75
2 year
price rise
(postNominet)
£4.50
£3.90
£4.99 £6.98 £6.99 £13.98 £2.00
£7.00
£1.75
£4.50
£4.49 £5.58 £5.99 £11.98 £1.50
£4.49 £8.98 £5.99 £11.98 £1.50
£4.79 £6.82 £6.39 £12.78 £1.60
£6.40
£3.00
£5.96
£1.25
£1.25
£1.35
£3.90
£0.50
£3.46
In other words, the HEG group is making, on average, an extra £1.35 profit on every
1-year registration and £3.46 extra on every 2-year registration, even after taking the
Nominet price rise out of the equation.
The effect for consumers is that the price they pay for a 1-year domain registration
rises by 33% and the price they pay for a 2-year domain registration rises by 87%.
3 out of 4 of the above HEG brands offers a 2-year registration period as the default
option when people try and register domains through them, so it is likely most
registrants will have registered for 2 years at a time.
So a 7% rise in Nominet’s underlying wholesale price, plus the elimination of a
price break, has resulted in nearly a quarter of all domain registrants paying
87% more for their domain names. And that’s just for one registrar group,
HEG.
At the same time, the HEG group itself will take in an additional £6,729,421 a year
from the price increase, of which £2,425,503 will go to Nominet and the remainder
will accrue to HEG’s bottom line.
While not all registrars have been forthcoming about their post-1 March prices yet,
those that have demonstrate the same sorts of increases as HEG group’s.
For example:
BRAND
Old
1
year
price
Daily.co.uk £5.99
£3.89
UK2
£4.50
LCN
£4.99
Zen
£6.99
FastHosts
Average £5.27
Old
2
year
price
£9.98
£5.00
£6.00
£9.98
£7.98
£7.79
New
1
year
price
£6.24
£6.49
£4.95
£6.99
£6.99
£6.33
New 2
year
price
£11.98
£12.98
£8.95
£13.98
£13.98
£12.37
1
year
price
rise
£0.25
£2.60
£0.45
£2.00
£0.00
£1.06
2
year
price
rise
£2.00
£7.98
£2.95
£4.00
£6.00
£4.59
1 year
price rise
(postNominet)
£0
£2.35
£0.20
£1.75
-£0.25
£0.81
2 year
price rise
(postNominet)
£0.50
£5.48
£0.45
£1.50
£3.50
£2.29
So in nearly every instance, the big retail registrars have used the excuse of Nominet
raising prices to raise their prices a lot more – in some cases more than doubling
them.
CRUNCHING THE NUMBERS: OVERALL IMPACT ON UK CONSUMERS
We need to make some assumptions, because Nominet guards its figures closely, and
we only have access to a minority of new registrar prices. So what follows is an order
of magnitude estimate, not an exact number.
Assumptions used in this estimate:
 10% of domains are sold directly to “self managed” entities paying wholesale
prices, virtually all of whom will be registering/renewing for 2 years at a time
(let’s assume 1 in 10 manually change the shopping cart to 1 year instead of 2)
 65% of retail domains are sold 2 years at a time, and 35% for 1 year at a time.
 Other registrars will exhibit similar patterns of behaviour as those that have
already declared their new pricing
 We use the average of the HEG group pricing for the domains they manage
 We use the average of the non-HEG group pricing for all other registrars
 The impact of the renewal rate is not been modelled (a simple 100% renewal
is assumed; Nominet’s historic renewal rate is around 71%)
 Many small registrars charge much higher prices than the larger players in the
UK namespace, but the average “large registrar” price has been used to model
the impact of the entire price rise (i.e. conservative approach)
 No account has been made of the impact of .uk which will become nearmandatory for sensible, forward-thinking businesses from June 2019 (and
necessitate the holding and renewal of a .co.uk/.uk pair, rather than just the
.co.uk)
Then
Market
segment
Old
1
year
price
Old
2
year
price
New
1
year
price
New 2
year
price
Number
of 1 year
regs
Number
of 2 year
regs
Consumers
pay this
much extra
per year
Self
managed
registrants
HEG
group
registrants
Non HEG
group
registrants
£3.50
£5.00
£3.75
£7.50
106,608
959,474
£1,225,993
Nominet
receives
this much
extra per
year
£1,225,993
£4.79
£6.82
£6.39
£12.78
943,251
1,751,751
£6,729,421
£2,425,503
£5.27
£7.79
£6.33
£12.37
2,414,907
4,484,827
£12,843,512
£6,209,762
GRAND
TOTAL
£20,798,926 £9,861,255
Currently, domain registrants pay around £43,458,762 a year for their domains. This
will rise to £64,257,688 a year as a result of Nominet’s price rise.
In other words, domain registrants will have to pay an extra £20,798,926 a year for
their domain names, and the average price they pay per domain will rise from £4.08 to
£6.03 a year (a 48% price rise).
In practice, two thirds of retail registrants will experience price rises of between 67%
and 87% and the rest will see price rises of between 20% and 33%.
Nominet will receive £9,861,225 of that increase, and the retail registrars will make
an extra £11,739,481 a year.
Over a decade, Nominet’s price rise will cost consumers two hundred million
pounds, and Nominet’s revenue will rise by a hundred million pounds – this, for
a supposedly not-for-profit organisation that already boasts a hefty working
surplus every year.
All this as a result of Nominet adding 25p to the cost of a domain registration –
and doing away with the concept of a 2-year registration price break.
About the Author (and Declaration of Interests)
This document was written by Edwin Hayward.
I am a director and co-owner of 2 UK Ltd companies that stand to be directly impacted by
Nominet's forthcoming price rise, Memorable Domains Ltd and Maps Ltd.
My involvement in the domain name industry started in 1996 when I established the world's
first dedicated domain name news and information website, iGoldrush.com. I sold this
website to its current owner in 2000, but I have remained active in the industry ever since.
I have presented on panels at a number of domain conferences, most notably the
MeetDomainers showi held in Manchester in August 2010, and the TRAFFIC ccTLD
conferenceii held in Amsterdam in June 2009. I have also exhibited at Internet World in 2008
and 2009.
On occasion, I have featured in the media on domain name issues, going back to news reports
by CNET.com in 1997iii iv, and I am referenced in "The Domain Name Game", a book by
David Kesmodel.
Memorable Domains Ltd is a domain investment company that maintains a portfolio of over
7,000 generic, descriptive .co.uk domains (names such as MapleSyrup.co.uk,
SearchEngine.co.uk, Comedies.co.uk and ElectricBicycles.co.uk).
More information: http://www.memorabledomains.co.uk/
Maps Ltd is focused on developing local area guides (business / tourist directories for towns
and cities across the UK). Developed sites include Maps.co.uk, Cambridge.co.uk,
BuryStEdmunds.co.uk, Newmarket.co.uk, Stowmarket.co.uk and others. It maintains a
portfolio of over 70 geo domains for future development, including Blackpool.co.uk,
Lancaster.co.uk, Kendal.co.uk, Map.co.uk and Britain.co.uk.
More information: http://www.maps.ltd.uk/
i
http://morganlinton.com/meetdomainers-manchester-2010-day-one/
http://www.dnjournal.com/cover/2009/june.htm
iii
http://news.cnet.com/Name-game-with-Microsoft/2100-1023_3-200110.html
iv
http://news.cnet.com/Dirtybirds.com-defies-Microsoft/2100-1023_3-200132.html
ii