Ethos Capital, led by former ABRY Partners Managing Partner, buys .Org registry.

I thought this might happen. And now it has.

Fresh off ICANN’s blunder letting Public Interest Registry set whatever price it wants for .org domain names, Internet Society (ISOC) has sold the .org registry Public Interest Registry (PIR) to private equity company Ethos Capital.

Game. Set. Match.

This gives Internet Society a huge (as yet unkown) endowment rather than worrying about what the future of the .org domain name holds. PIR generated $101 million in revenue in 2018 and contributed nearly $50 million to Internet Society. It contributed $74 million to ISOC in 2017.

ICANN made this deal much more valuable by removing all price controls on .org.

While Internet Society might not have wanted to raise prices, a private equity company surely will try to maximize the value of the registry.

In a release about the deal, Internet Society noted:

Today’s news has tremendous benefits for both the Internet Society and PIR. The transaction will help the Internet Society to secure its future through more stable, diversified and sustainable financial resources than it has at present, allowing the organization to plan for the long term and advance its vision of an Internet for everyone on an even broader scale. It will also enable PIR to continue expanding its mission and important work under new ownership — including its goal of keeping .ORG accessible and reasonably priced — while further strengthening and deepening its commitment to the .ORG Community.

We’ll have to see what “reasonably priced” means. Certainly, the goals of Ethos Capital are very different from Internet Society.

Ethos Capital is a new private equity firm lead by Erik Brooks. Brooks was at Abry Partners until earlier this year. Abry Partners acquired Donuts and installed former ICANN President of Global Domains Akram Atallah in the top spot there.

Donuts co-founder Jon Nevett left to be CEO of Public Interest Registry.

The other person at Ethos is former ICANN Senior Vice President Abusitta-Ouri.

Ethos appears to have just been founded. It acquired the domain name EthosCapital.com at the end of October through Afternic.

[Update: The firm might be tied to former ICANN CEO Fadi Chehadé as well.]

PIR CEO Jon Nevett commented to Domain Name Wire:

Our goal has always been to make .ORG accessible and reasonably priced – and that will continue under our new ownership. PIR has made reasonable decisions on price in the past, and we will uphold this spirit going forward. We would never make dramatic price increases as we know it would harm our registrants, as well as our registrars.

ICANN watcher George Kirikos brought up the potential of a PE sale when ICANN proposed the contractual changes removing price caps:

Some have suggested that the Internet Society and/or PIR would never raise fees by a large amount. However, “hope is not a strategy.” Past performance is no guarantee of the future. Leadership can change, as can priorities/missions. It’s clear from section 7.5 of the the draft contract itself: https://www.icann.org/sites/default/files/tlds/org/org-proposed-renewal-18mar19-en.pdf that ISOC/PIR could simply sell or assign the registry contract to another entity (e.g. Private Equity, just as registry operator Donuts was sold by its founders), and that new owner/entity could take the heat for future egregious fee increases. ICANN would not be able to stop such a deal. Such a sale would allow ISOC to create a huge endowment for itself worth billions of dollars, given that .org is arguably the second most desirable gTLD, after only .com.

This type of deal doesn’t happen overnight, and has likely been in the works for a while.

When ICANN decided to remove price restrictions on .org, my thought was this would be a pivitol moment in the history of ICANN. But it probably wouldn’t come back to bite it for another 5-10 years, at which point current leadership would have moved on.

But it came back to bite it now, and many more groups will call upon ICANN to justify its decision.

Public Interest Registry had operating income of $45.9 million in 2018. Any amount it increases prices falls directly to the bottom line.

I have reached out to Ethos for comment.

Update: Richard Kirkendall, CEO of Namecheap, which filed a reconsideration request with ICANN over the .org price cap removal, released this statement to DNW:

Obviously, we are disturbed by the timing of this transaction and how it reflects on the decision by ICANN to lift the price caps. While we all as registrars will be affected by this sale, the biggest losers will be our customers and all other .org holders who are sure to see their renewal prices increase over time.

Additional coverage:

The economics of .org domain names

The interesting connection between the .Org deal and ICANN

Note: this post has been updated throughout the day with more information and comments from the industry.