In 1995, Stephen Boland sat in his government office while working as the macroeconomic planner for the Pacific microstate of Tuvalu when the fax machine whirred to life. On its thermal paper, it printed a message that would later amount to a winning lottery ticket. The message was a dispatch informing Tuvalu it had been assigned a country code top-level domain – the string of characters at the end of a URL, like .com or .org – for its Internet addresses. The domain for Tuvalu happened to be “.tv,” the worldwide metonym for broadcast entertainment. At the time, the ultimate significance of the designation was not clear to Boland, nor the others in the office. They had a more pressing question.
“We were all sitting around looking at this fax,” Boland said. “People were talking about ‘dot TV’ … and we’re going, ‘what the hell is this Internet thing?'”
Nearly 25 years later, the Internet’s full power remains relatively unknown to many people on the island, but its evolution has made Tuvalu’s .tv domain one of its most valuable resources. Thanks to the rise of livestreamed programming and competitive video gaming, Tuvalu earns about 1/12th of its annual gross national income (GNI) from licensing its domain to tech giants like Amazon-owned streaming platform Twitch through the Virginia-based company Verisign. And in 2021, when Tuvalu’s contract with Verisign expires, that percentage figures to push significantly higher.
Masters of a valuable domain
Located halfway between Hawaii and Australia, Tuvalu is a chain of coral atolls and reef islands with a population of about 11,000. Before gaining independence from the United Kingdom in 1978, Tuvalu was part of Britain’s Gilbert and Ellice Islands protectorate. Tuvalu’s capital island, Funafuti, is an 11-mile crescent of coral encircling a 106-square-mile lagoon. There is one airport, one bank, one hospital and one road that spans the length of the atoll. No matter where one stands on the atoll, it’s possible to see across the entire island with ease.
Tuvalu’s fishing industry and limited agriculture does not yield enough food to support the population of the microstate, which subsists primarily on imported goods. Despite this imbalance in food production, the quality of life in Tuvalu is relatively high. Compulsory public education has brought the nation’s adult literacy rate up to nearly 99 percent, and the World Bank classifies Tuvalu as an upper-middle-income economy, with its territorial fishing rights accounting for the biggest chunk of its GNI at an estimated $19 million (roughly Rs. 135.71 crores) in license fees in 2018. But another sizeable portion stems directly from its licensing of its .tv URL suffix, thanks to the recent surge in streaming sites. As sites utilising .tv grow in prominence, Tuvalu’s domain on the web may eventually supersede that of its seas.
Few Tuvaluans are able to access the streaming services powered by .tv. The nation’s Internet, though widely accessible, is limited to a satellite connection with reduced streaming capacity. However, with more than 140 million people around the world consuming content via Twitch.tv and other streaming platforms, the monetary benefits have helped Tuvalu in more tangible ways than entertainment. (Twitch is owned by Amazon, whose CEO, Jeff Bezos, owns The Washington Post.)
“[.tv] has provided a certain, sure income,” said Seve Paeniu, Tuvalu’s Minister of Finance. “It enables the government to provide essential services to its people through providing schooling and education for the kids, providing medical services to our people, and also in terms of improving the basic economic infrastructure and service delivery to our communities.”
To monetise .tv, the government of Tuvalu has negotiated a series of agreements allowing foreign companies to market the top-level domain for commercial use. Under the current deal, signed in 2011, Virginia-based network infrastructure firm Verisign pays Tuvalu around $5 million (roughly Rs. 35.71 crores) per year for the right to administer .tv. For a nation whose annual domestic revenues tend to hover around $60 million (roughly Rs. 428.56 crores), this is a substantial benefit.
The agreement with Verisign expires in 2021, opening the door for a renegotiation between Tuvalu and Verisign. With the perceived value of .tv buoyed by the success of Twitch.tv and other platforms – thanks to a sustained and substantial increase in esports and video game streaming – an updated agreement could be a bonanza for Tuvalu.
The .tv domain has been a useful asset for Verisign as well. As a registry, Verisign is essentially a wholesaler of domain names. It creates domain name extensions, sets the rules for those domain names and accredits retailers – registrars such as GoDaddy or Dynadot – to sell domain name registrations directly to consumers. It’s difficult to calculate exactly how much Verisign profits from its control of .tv each year, but a look at some of the numbers involved provides an idea of the bigger picture.
Verisign has not made public the exact number of registered .tv URLs. DomainTools lists 500,700 .tv sites, while Domain Name Stat sets the number at 470,102. Both of these figures are, at best, estimates based on a tally of visible sites rather than total registered domains.
Verisign charges registrars an annual fee of $7.85 for each .com domain in its registry. “Premium” top-level domains such as .tv are more expensive; the exact fee for .tv is not publicly available, but registrars reported a 12 percent price increase in 2017. One example, seen in a document obtained by The Post, showed a site charged just over $100 a year for the continued registry and maintenance of its .tv address. Experts have estimated that the operating cost of Verisign’s registry is $1 per domain per year.
One number is not up for debate: In 2018, Verisign’s domain registry operation brought in a total of $1.21 billion in revenue, according to its investor’s report.
“We are proud of our long-standing relationship with the government of Tuvalu, and of the work we’ve done to help make .tv domains some of the world’s premier destinations for entertainment,” said a Verisign representative. The company also administers other common domains such as .com, .net, .gov and .edu.
But the Tuvalu-Verisign relationship has not always been harmonious, which could set the stage for Tuvalu to try to garner even more money for the domain licensing deal.
In search of a new deal
Before the 2011 contract renegotiation between the two parties, former Minister of Finance Lotoala Metia described Verisign’s annual .tv payments – then $2 million per year – as “peanuts.”
Paeniu’s rhetoric is more diplomatic, but he shares his predecessor’s mind-set. “In the end, there have to be compromises, and therefore, at the time, we ended up with such an arrangement,” said Paeniu of the 2011 negotiations. “Currently, in my own view, that is not acceptable – we could have achieved a better deal.”
Boland shares that assessment.
“This is a really underutilised resource that Tuvalu could be making a lot more money out of, if it had had somebody on its side to really battle for it, some sort of IT-streaming expert that knew the ins and outs of what would be a good arrangement,” Boland said.
As the renegotiation approaches, Paeniu and his colleagues have kept a careful watch on the perceived value of .tv as the numbers around streaming entertainment have skyrocketed. According to Twitch Tracker, Twitch’s average concurrent viewership increased by 1,580 percent (77,798 to 1,229,122) between September 2012 and December 2019. In 2012, there were 3,386 partnered channels on Twitch; now there are over 27,000. In terms of broader streaming service numbers, Cisco predicted in 2017 that online video would account for 82 percent of all web traffic by 2021, when the .tv renegotiation is scheduled to occur.
Should Tuvalu not get an offer it deems to be fair, the country could choose to license the .tv domain to one of Verisign’s competitors, like Neustar or Afilias.
“The current agreement has disadvantaged Tuvalu from capitalising on the advent of these online streaming services and the potential additional revenue that those services could offer with regard to the .tv agreement,” said Paeniu. “Moving forward, it is indeed the intention of the Tuvalu government to renegotiate the agreement when it expires in about a year’s time.”
While hopeful for a successful renegotiation with Verisign, Paeniu said that Tuvalu will be open to exploring bids from other companies to take over the management of .tv in 2021. “Our objective is to ensure that we maximise our benefit from this.”
Another influx ahead?
Though specific .tv usage numbers are unclear, the overall use of country code top-level domains is on the rise. According to Verisign’s August 2019 domain name industry brief, total registrations of this type of top-level domain have increased by 6 percent year over year. The designation of .tv is not one of the 10 largest country code top-level domains, but it has increased in prominence in recent years.
Leading the charge is Twitch.tv. In the battle for streaming supremacy, Twitch has tethered its hopes to the rapidly growing world of gaming and esports content. This strategy has paid off so far: with 9.36 billion hours viewed in 2018, Twitch has begun to match the viewership numbers of cable news networks such as Fox News and MSNBC.
Twitch is by far the most well-known .tv website, and the only one ranked in Alexa’s top 50. But many of its competitors have registered .tv URLs of their own. DisneyPlus.tv redirects users to Disney’s main website; the same goes for Netflix.tv, Hulu.tv, YouTube.tv and Amazon.tv. As long as Twitch remains in the spotlight, .tv isn’t going anywhere. And now the government of Tuvalu is wise to the stakes.
“I think the battle [for increased licensing fees] should have been started back in 2011,” said Boland. “Even at that point, it was quite clear what was going on with the development of the top-level domains, and broadcasting and streaming and all those sorts of things … all the expertise and the information, the knowledge, seemed to be residing with Verisign. Tuvalu really had very limited expertise, very limited understanding of the market involved. And so it’s a very asymmetric sort of negotiation that takes place.”
Regardless of their success in the future negotiations, Tuvalu’s citizens should soon be able to start Twitch channels of their own and participate in the streaming frenzy to which their country has been financially tied. Thanks to a World Bank grant, plans are underway to install a submarine fibre optic cable in Tuvalu, drastically increasing the nation’s bandwidth and boosting Internet connectivity.
“At that time,” said Paeniu, “perhaps our community and our people will be able to directly benefit from the online streaming services that .tv would be able to offer.”
© The Washington Post 2019
Source: NDTV Profit