I predict that the business of domain leasing will grow significantly in the next few years as more domain owners choose to delay capturing a domain name’s appreciation.  It is an area of specific interest to me because I do not foresee capturing the value of some keyword generic .tv names in my portfolio for a few years. 

In its basic form, domain leasing involves a periodic or fixed payment ("Lease Payment") made by the person leasing the name (the “Lessee") to the domain owner (the “Lessor") for a specific time period (the “Lease Term"). 

During and for the length of the Lease Term…

a Lessee theoretically controls the domain and can do anything he or she has the right to do under the lease agreement, including doing nothing with the domain, parking the domain to earn PPC revenue, or developing the domain.  When the Lessee does not renew the lease and/or the Term expires, the rights revert back to the domain owner. 

In a sense, no individual is a domain owner when you think about it.  You can register a name from a domain name registrar, but you do not really own the domain name per se. 

In fact, I would argue that those labeled as domain owners are really Lessees of domain names because they make Lease Payments in the form of a registration or renewal fees to secure the rights to those domains for a year or year(s), i.e. Lease Term(s).  This applies to every domain name extension that isn’t free, which last I checked was all of them, including .tv.  (I will continue to refer to those that register and renew domain names as domain owners for the purposes of this entry.)

The premium pricing structure created for some .tv names by Verisign is no different.  To acquire a .tv premium name, you must make a Lease Payment which entitles you to do what you want with the domain for a Lease Term.  For example, take news.tv…if you paid $500,000 for a year, you would acquire the right to what you would like with the domain for one year and then you have the right to renew the domain for subsequent years ("Right To Renew").  This Right To Renew can be the single most valuable thing to have when it comes to domain names because it entitles you to retain the value related to the domain’s appreciation. 

For that reason, many Lessees refuse to lease a domain name for anything less than several years because they plan to invest a significant amount of money in the first few years to generate several times that amount several years later.  If a Lessor cannot provide a Lease Term that would enable a Lessee to capture the profits expected in later years based on the Lessee’s development plans and revenue projects, then the Lessee will not sign the lease agreement.  If however the expected future returns on the Lessee’s investment fall within the Lease Term, then the Lessee will sign the lease. 

Two other rights of interest to Lessees are the right to extend or renew the lease for a certain period of time and a right to purchase the domain at the end of the lease based on a predetermined formula that both the Lessee and Lessor agree to when the lease is signed. 

Some .tv domain owners may want to consider leasing their keyword .tv names if they have no plans to develop or sell those names in the short term.  Why not markup the renewal fees related to your premium .tv names and become a Lessor just as Verisign has done to us with the premium .tv names.  It’s a great way to earn an income stream, cover the renewal costs, and earn a profit, giving you more time and money to spend on a development project related to your other .tv domain names.

I love the idea.  Do you?