Dollars and Sense

FairWinds Partners —  September 12, 2012

At this point, we all understand that for new gTLD applicants, new domain extensions do not come cheap, especially considering the $185,000 price tag just to submit an application. But what many have not yet come to terms with is the fact that even if companies did not apply for their own new gTLDs, there will be significant costs associated with the rollout of potentially up to 1,409 unique new extensions over the next few years.

Specifically, we are referring to the costs that all businesses will incur in order to protect and promote their brands and trademarks in new gTLDs. When it comes to protection, many businesses are familiar with the process of Sunrise registrations. As we described in our “Clearing Up Clearinghouse Confusion” post, new gTLD Sunrise periods will function similarly, but with brand owners only having to register their trademark once, in the Trademark Clearinghouse, rather than with each individual registry.

In addition to the costs for registering domains during Sunrise periods, brand owners will also need to defensively register permutations of their brands and trademarks at the second level in new gTLDs, including misspellings (think Aiddas of Addidas for Adidas) or combinations of brands with generic terms (think AdidasSoccer). This will involve paying a fee to register those names across certain gTLDs initially, as well as another fee to renew those registrations regularly, generally once a year. Now, certain gTLD applicants are planning to include additional Rights Protection Mechanisms like a Domain Protected Marks List (DPML), which would block these kinds of permutations from being registered by third parties. For those registries with a DPML, brand owners would not have to pay the recurring renewal fee for marks they block under the DPML.

In addition to purely protecting their brands and trademarks from cybersquatters, many businesses will also want to register certain second-level domains in select extensions for proactive reasons, such as to reach a different online audience or expand into a new market. In that case, they would pay to register the domains once and then pay an annual renewal fee.

So now that we’ve gone through a few of the options businesses will need to pursue, what do the actual costs look like? Excluding applications for restricted gTLDs, as many as 550 “open,” or unrestricted new gTLDs could be approved and delegated into the root. For the sake of simplicity, assume that none of these include a DPML or other kind of block. Let’s say that Company X owns 10 trademarks. Based on past launches, FairWinds estimates that Sunrise registrations will cost approximately $200 apiece. For 10 trademarks across 550 gTLDs, the total cost for Sunrise registrations will be $1,100,000.

Additionally, assume that Company X also wants to protect five permutations or misspellings per trademark. By our estimates, registrations in new gTLDs will likely cost an average of $20. That’s another $1,000 per gTLD, or another $100,000 total when gTLDs first launch, and then every year after that for the life of the registry.

Now assume that of those 550 new gTLDs, 20 are especially relevant to Company X’s business model, so in addition to the five permutations of its 10 trademarks, Company X wants to register another 20 combinations of its brands and generic terms. That equals an additional $80,000 per year.

In total, Company X’s costs are $1,200,000 in the first year, plus another $180,000 per year in renewal fees just for the permutations of its trademarks. The cost to renew domains registered during Sunrise could be even higher, depending on the registry.

Now, as we said, some of these new, open gTLDs will include a DPML or other options like a perpetual block (first introduced by ICM Registry during the launch of .XXX), but many may not.

Of course, it takes a much more detailed process to develop an accurate brand promotion and protection budget for new gTLDs, but it is clear that all businesses – both those that applied for new gTLDs and those that did not – are going to have to make a significant investment to stay ahead of cybersquatters once new gTLDs begin to go live.