Why is it a bad strategy?
When registries start acting like domainers instead of registries, there is a major problem.
They are effectively in competition with a section of the market that initially drives some of the growth in the early phase of a TLD's existence.
And once word gets around that the game is rigged, then the pros won't want to play. Pretty soon, that attitude spreads to most domainers and the TLD is left with relying on the mom and pop businesses who are using .COM or .ccTLD. And they have no real reason to switch.
So what happens is this: No landrush boost (or a very flat one) followed by disenchantment and the DotWhat? effect. The public does not even recognise or remember the TLD.
After that comes the Junk Dump (first anniversary when the highly speculative domains that could not be flipped are dropped). The percentage dropped can vary but there might be a few newbies ready to pick up the dropped domains but there may be no natural drops as the deleting domains might be hoovered up for auction by the registries or by large registrars.
The second anniversary is sometimes more lethal as it is the Hold'em or Fold'em time for those hanging on to their domains hoping for an increase in value.
Development and usage runs in parallel with all of this. If there is no significant development in the first six to eleven months, then the perception that the TLD is a Dead Zone will grow amongst prospective registrants. If you see registries providing dodgy figures about usage and PPC landing pages for undeveloped domains claimed to be simple redirects, then it is almost certain that there is a problem.
Regards...jmcc
---------- Post added at 05:03 AM ---------- Previous post was at 04:47 AM ----------
Second, the market value can go down very quickly past the launch phase and when the excitement and initial interest has waned.
For a large TLD with global appeal, this tends to happen after the first six months of operation. I'm not an expert on market values but there are compressed landrush phases visible with some of the new gTLDs and trends that take months to show up (e.g the big weekend slowdowns) are appearing within weeks.
With the variable registration fees and renewal rates, some of these new gTLDs will have a battle ahead to break 100K registration in a year.
Regards...jmcc