Monopoly? Melbourne IT buys rival Netregistry

21

larrybloch

news Hosting and domain name specialist Melbourne IT announced today that it had entered into an agreement to acquire its biggest rival, Netregistry for $50.4 million, in a move that will ensure the fortunes of the company’s founder Larry Bloch but also potentially create a giant with close to monopoly powers over the Australian domain name space.

“The proposed transaction will bring together two of Australia’s leading web-services businesses, generating significant benefits for customers, employees and shareholders of both companies,” said Peter Findlay, acting CEO of Melbourne IT, in a statement announcing the deal.

Larry Bloch, founder and CEO of Netregistry commented: “This transaction validates the tremendous success the Netregistry team have had since 1997 in building a leading web services business. The merged entity will benefit from the leading products, management team and efficiencies of both companies. I look forward to joining the board of Melbourne IT and being involved as the businesses are integrated, evolve and grow their services”.

The payment will be made via a combination of cash and scrip at the election of the Netregistry shareholders. Shares constituting between 4.99% and 9.99% of Melbourne IT’s outstanding shares will be offered to Netregistry shareholders with the balance in cash. This translates into between 4.3 million and 9.3 million shares in Melbourne IT and between $38 million and $45 million in cash.

Simon Jones, Melbourne IT’s Chairman commented: “Melbourne IT and Netregistry have long-held respect for the other’s business; they will now integrate for mutual benefit. We look forward to welcoming the Netregistry team and jointly tackling the growth opportunities in online services. I am particularly looking forward to welcoming Larry Bloch to the Melbourne IT Board with his depth of knowledge of the online services sector and thought leadership.”

According to Melbourne IT, the acquisition has numerous benefits for Melbourne IT and Netregistry, including: the assimilation of customer-facing platforms, which the pair said would “enhance customer experience and product usability”; the ability to offer “best in class domain registration & management, email and web hosting products”; the integration of Netregistry’s management team, with “deep experience in the SMB segment” and efficiencies in the consolidation of infrastructure.

The transaction is subject to regulatory approvals, including by .au Domain Administration (auDA), and is expected to close during the first half of calendar 2014. Melbourne IT was advised on the acquisition by Gresham and Gilbert + Tobin, supported by PwC and Ernst & Young. Netregistry was advised by Grant Samuel Corporate Finance and Allen & Overy.

The acquisition has the potential to consolidate Australia’s small domain name industry sharply, with Netregistry being Melbourne IT’s largest Australian rival in terms of domain names and a strong web hosting rival as well.

Melbourne IT was initially the only domain name seller in Australia in the 1990’s, but the market was eventually opened up to competing sellers. Netregistry quickly took a large slice of the market, including through several acquisitions of its own, such as PlanetDomain in 2007 and TPP Internet in 2009. In 2007 Netregistry said it had 27 percent of market share of the Australian domain name market, and in 2009 Netregistry said it had overtaken Melbourne IT has the largest seller of domain names in Australia, as well as being 20 percent ahead of the number three player.

It is unclear at this point whether .au Domain Administration, the Australian domain name regulator, could block the merger on competition grounds, but the Australian Competition and Consumer Commission would be likely to have the power to do so.

The news will also bring one of the most outspoken and high-profile executives in Australia’s Internet space within the wings of one of its oldest companies, and a long-term rival. Netregistry founder Larry Bloch is known in the industry for his ability to create controversy. For example, in May 2009 the executive was forced to defend Netregistry’s use of women dresses in naughty nurse outfits to promote Netregistry at Australia’s largest trade fair CeBIT.

According to Bloch, as reported by ZDNet at the time, the costumes really had all been about the medical theme — a little fun — and were not supposed to have been offensive. “I think it’s political correctness going gang busters,” he said.

opinion/analysis
I don’t have a lot of data in front of me regarding the actual market share of Netregistry and Melbourne IT in the domain name and hosting space. However, I suspect that between them, the pair would be likely to command a massive slice of the Australian market in these areas.

Web hosting isn’t really an issue … it’s easy enough to set up an Amazon Web Services server these days, and there are plenty of options competing with the pair. But when it comes to domain names … well, put it this way: Pretty much everyone I know is with Melbourne IT, Netregistry or both. Delimiter uses Netregistry for our cluster of domain name assets. I’m not thrilled by the news that I am suddenly a Melbourne IT customer, and I’m sure many other people will be equally unhappy at the prospect.

I don’t want to deny Bloch his multi-million-dollar payday. But personally I think the ACCC or auDA will need to look at blocking this deal. It’s clearly bad news for Australian consumers and will drastically limit competition in the domain name space. I don’t think Netregistry and Melbourne IT should be allowed to come together. I’d much rather see Bloch find another path if he wants to find an exit strategy for his group.

Image credit: Netregistry

21 COMMENTS

  1. Given neither company has invested much in the way of innovation regarding their platforms or domain management tools, and indeed, Melbourne IT seem to be even more backward than Netregistry in many regards, I’m not very pleased with this news.

    I have a large portfolio of .au domains held through Netregistry – and am a reseller, providing domain services to many of my clients as a value added feature of my business.

    I’d be very keen to see more competition in the .au domain space rather than less – I think there will be even less reason to see these guys innovate in the future with Melbourne IT running the show :(

  2. Just spent the last week transferring all out domain to netregistry including a dozen or so from Melbourne IT

  3. Anyone who uses MelborneIT is lazy and I’ll-informed – $140 for .au registration that can be found elsewhere (at reputable registrars) for $20.

    I also would avoid NetRegistry like the plague – as a previous customer with 30 or 40 domains they simply handed over my account to someone else. I managed to get it back after a few days with no lasting damage done, but not even so much as an apology from NetRegistry. IMO they belong together – good luck to them.

  4. Melbourne IT are clowns and I’ll also be upset at the thought of being one of their customers overnight.

  5. Well that’s just wonderful news – not.

    As a NetRegistry reseller I’ve just been migrated to the TPP wholesale platform (which NetRegistry purchased some time ago) and now I find myself back in the arms of Melbourne IT, a place where I vowed never to spend a cent again after several “unfortunate” events with them.

    Looks like I’m going to have to look for another registrar.

    Unimpressed.

    Anyone want to start a co-op?

      • I’d love to hear suggestions about reseller options, that is, a supplier that I can resell and provide my clients with a turn-key solution, that doesn’t treat each individual domain as a separate account and offers me the ability to link domains together, so my client can transfer them elsewhere if required.

    • Just spoke with TPP reseller support.

      They found out about it this morning and advised me that they didn’t think that this would impact resellers in the short term. They went on to say that they understood that this acquisition was based on Melbourne IT acquiring the TPP management system.

  6. BTW to address the title of this article, I very much doubt auDA or the ACCC will be overly concerned about this – it’s not a monopoly nor even a situation where these businesses exist in an unfair playing field (such as Telstra) – all primary registrars have access to domains at the same price, and have to meet the same minimum standards, it is up to them what price they set and what administration facilities they implement for customer management.

    The interfaces exposed by both of these companies are lacking (the last time I checked, around a year ago) – NetRegistry’s used to be utterly appalling but no idea if they have actually invested in improvements. In my experience their staff were comprehensively incompetent, too.

    They are actually very complementary businesses – NetRegistry targets budget minded customers who aren’t very discerning while MelbourneIT cater to those who perceive them to provide some kind of ‘premium’ service because they’ve been around longer and charge so much more – the same kind of strategy pursued by Mercedes Benz and David Jones to good effect.

    • I use crazydomains personally, for my 2 domain names, never had any actual issue with them, though i don’t do DNS through them i do that through CloudFlare since they have a really nice interface while keeping it free.

      CrazyDomains for cheap domains, CloudFlare for DNS, Google Apps (i got in when it was free) for domain emails.

  7. Drastically limit or remind people to look at their options?

    VentraIP sells .au and actually has reasonable hosting (unlike Netregistry and Melbourne IT).

    And crazy domains is super cheap (but a bit dodgy).

  8. I have been bitterly disappointed by Netregistry over the last 12 months, having been a loyal reseller for many years.

    I am actively moving 30 – 40 domains and web hosting away from them. Their service is appalling, their hosting platforms are over-subscribed and it can take 2 or 3 phone calls simply to get an AUTH-CODE or find someone who knows what they’re doing.

    Netregistry used to be competitive and reliable, but in the last short while their service has turned to absolute garbage.

    When I heard this news, it suddenly made a lot of sense, that they’d been running the business into the ground ahead of a takeover.

    As for Melbourne IT, I agree with TrevorX – they purport to cater to those who perceive them as providing some kind of ‘premium’ service.

    I now use crazydomains or Hover for registrations, VentraIP for reliable local hosting, and run my own mail and DNS server.

    As a friend said yesterday, “Monopoly? No. The loss of Netregistry does not remove a credible competitor from the market.”

    Good riddance to bad rubbish.

  9. As a NR/TPP customer I am not happy. I don’t care about the web hosting but the domains side creates a monopoly no doubt. Even if I didn’t generally care about that I would still be worried that now I’m a Melbourne IT customer. This is going to trash the NR brand, but for $50mil I can’t say I would do it differently. But I’m just a customer; one off to whirlpool to look for worthy alternatives.

  10. VentraIp Wholesale account has been applied for….

    I liked Netregistry and found their support useable, but loathed MelbourneIT for horrible service and deliberate ripoff pricing.

    I have a millimetre of hope that Netregistry might change MelbourneIT to suck less, but I am already planning the migration path for our 500+ client domains we manage.

  11. I can’t believe it because MelbourneIT domains are so expensive – can you believe $140 for .com.au. Just imagine my NetRegistry renewal going up next year for my ~30 domains will probably skyrocket from $18/yr to $70/yr under MelbourneIT!

    I’ll have to transfer from NR to another cheap provider. All the other domain providers (CrazyDomains, GoDaddy, VentraIP, InternetStack, DigitalPacific even IINET) are all cheaper than Melbourne IT and don’t have ridiculous renewal fees so will probably transfer my domains to one of them.

  12. That explains the idiocracy of my recent support experiences. I’m fed up to the back teeth with TPP after the terrible execution of all the changes they made in 2013. Lost clients. Lost hours. MelbourneIT ? No thanks!
    @ TrevorX – what are the best of the other options you say are out there?
    @ Onno Benshop – co-op, an interesting idea.

  13. I can’t believe it’d come to this, but having went from PlanetDomain to TPP, failed to escape Netregistry, and now winding up with MelbourneIT, I think I’ll be switching to GoDaddy – at least I can’t see MIT ever buying them out.

  14. Just transferring all domains and hosting from MelbourneIT to Jumba through a friend who is a Jumba reseller.

    Been with Netreg for some time and liked the service and products but will have nothing to do with MIT after numerous run ins with them on behalf of many of my clients. Expensive, atrocious support, what more could you want.

    Now need to contact all those clients that I moved from MIT to Netregistry and tell them they need to move again!

    Not happy Jan!

LEAVE A REPLY