Kanye has made billions for Adidas. Now, he could damage the company’s reputation.

For years, when celebrity partner Yeh, the musician and fashion designer formerly known as Kanye West made headlines for controversy, Adidas executives remained silent — even when the artist publicly disparaged the sports brand’s CEO remain silent.

But the Germany-based company broke its silence last week, days after the artist sparked widespread outrage by wearing a “WHITE LIVES MATTER” T-shirt at his Paris Fashion Week show. Adidas said on Thursday it was reviewing a commercial deal with Ye and his Yeezy brand, which it expects to bring in billions of dollars in annual revenue.

In the days since the announcement, the pressure on Adidas has only increased as Yeh has taken further bizarre behavior, including posting anti-Semitic tweets and an online video of him calling himself the “king of culture” , while showing an Adidas executive a pornographic movie. Now, Adidas executives must decide whether staying in touch with a partner that has made the company billions is worth the ongoing PR nightmare.

Analysis: Kanye’s anti-Semitic tweet could be a preview of the future of social media

Morningstar analyst David Swartz said Yeezy’s annual revenue is estimated at $2 billion, or nearly 10 percent of the company’s annual revenue.

“Partnering with Adidas Yeezy is one of the most successful in the history of our industry,” said Adidas. “We also recognize that all successful partnerships are rooted in mutual respect and shared values.”

Representatives for Ye and Adidas did not respond to The Washington Post’s request for comment.

Some experts say remaining silent has its own dangers.

“The problem is, if you go down the rabbit hole and you take, take, take, and then you look the other way, then in a sense you’re implicitly co-signing the act,” said Americus Reed, University of Pennsylvania Professor of Marketing at the Wharton School of Business.

A polarized “creative genius”

Some experts say Ye’s chaotic behavior is part of his brand and is often forgiven because fans believe they are what made him a genius.

“If you had the power of generations like Kanye West, you would do everything in your power to salvage the deal, keep him happy, and ignore some of the comments and go ahead with the product, and they’ve done it,” says the law textbook on the sneaker industry. Jared Goldstein, attorney and co-author of The Sneaker Law. “But I just think there’s only so much [Adidas] Can be taken. …the way Adidas existed, long before Kanye West, so I think they care about their overall image in the public eye. “

A 24-time Grammy Award winner and numerous critically acclaimed platinum releases, Ye has made a major impact on the music industry over the past two decades as a rapper and producer. His fashion breakthrough started in 2009 when he released the Nike Air Yeezy 1 in collaboration with Nike. But Ye was unhappy with the deal with Nike.

“He’s a free agent in the sneaker world,” Goldstein said.

Adidas collaborated with the artist in 2013. The company announced a major expansion in 2015, moving hundreds of employees from its German headquarters to a U.S. base near Portland.

Goldstein added that by 2016, Ye and Adidas had struck a royalty agreement and increased inventory to make products more accessible. The partnership made Ye a billionaire and opened the door to a new customer base for Adidas.

In the years since the deal, Adidas has improved its distribution, sales and gained market share in North America, Morningstar’s Swartz said. The company has also tapped into the resale market dominated by Nike and Michael Jordan footwear and expanded its athleisure business.

“Their brand equity in the minds of consumers has really gone up,” Goldstein said. “More deals with celebrities, athletes and designers are bearing fruit, and Adidas is really on fire because of the ‘Kanye effect.'”

But as he has with past partners, Yeh has publicly expressed his displeasure with Adidas. In June, he accused the company of stealing his designs, naming Adidas CEO Casper Rosted in a tweet.

According to Goldstein, these claims are almost certainly of no value. Although the contract between Adidas and Yeh was never made public, the industry standard is that Adidas owns the intellectual property rights to all designs created during the collaboration.

Ye gave a similar tirade to Gap, which in 2020 signed a deal to sell the artist’s designs with French fashion house Balenciaga and open a standalone “Yeezy” store. Ye cut off the partnership last month, and his lawyer told the BBC that Ye would set up shop on his own.

Yeh’s comments have made headlines over the years with Adidas. In 2018, he said on TMZ that slavery was an option; in 2020, after a presidential campaign rally in North Charlotte, South Carolina, he disparaged abolitionist Harriet Tubman, saying he and Then-wife Kim Kardashian considered terminating their first pregnancy. He then went on to rant on social media, revealing his strained relationship with his family.

Kardashian, a reality TV star and business executive herself, released a statement asking for “sympathy and empathy” as Yeh is dealing with mental health issues. Over the next few years, Yeh spoke ill of Kardashian, her family and her then-boyfriend, comedian Pete Davidson.

What does bipolar disorder feel like? Could it explain Kanye’s behavior?

The events of the past few days have further threatened Adidas’ reputation and identity as a brand, experts say. On Monday afternoon, Ye posted a 30-minute video on YouTube that included a scene where he appeared to show pornography to two Adidas executives. In the seemingly secret recording, Ye told them that “the company, the business and the partners are all doing it wrong”.

On Sunday, Twitter and Meta restricted Ye’s account for violating company policy and removed posts containing anti-Semitism.

Ye’s publicly anti-Semitic remarks are a particularly sensitive challenge for Adidas given the company’s own past.

For decades, Adidas has distanced itself from certain elements of the past and its founders, brothers Adolf and Rudolf Dassler, members of the Nazi party. Originally known as Dassler Brothers Sports Shoe Factory, the company was staffed with members of the Hitler Youth League, as sneaker expert Jason Coles wrote in his 2016 book “Golden Kicks: The Shoes that Changed Sport.” The brothers parted ways after the war, with Rudolph turning half of his business into Puma, and Adolf renaming the original Dassler company to “Adidas.”

“There’s a dark chapter in the company’s history, and the company obviously doesn’t want people talking about it,” Swartz said. “This can bring it back.”

Experts say the impact on the company’s business will not be immediate if Adidas ends its agreement with Ye. The German company will still own the intellectual property for all Yeezy designs produced since Ye signed the contract, Swartz said, and may have stockpiled for release.

“You can’t end it right away – there will be some laughs,” he said. “It would be expensive to stop selling it.”

If Ye signs the industry standard agreement, Adidas will also have Goldstein said it has the right to reproduce released sneakers and manufacture unreleased designs. Although Adidas had to avoid Ye’s image and likeness and stripped off the Yeezy brand, it wouldn’t be noticed since most of the branding is on sneaker insoles where people can’t see it.

Adidas’ bigger problem

Ye’s latest tirade broke out that Adidas was already facing problems. The company’s U.S.-listed shares have fallen more than 60% over the past year as Adidas’ business in China, its most profitable region, shrank by two places over the past five quarters as stores and factories closed during the pandemic number, Swartz said.

Adidas is also facing a leadership change. Chief executive Rosted will leave next year.

“This Kanye controversy comes at the right time,” Swartz said. “It does put companies in a more difficult position because they don’t want to make any big changes in strategy and then have a new CEO come in and then have to change again.”

Sonia Rao contributed to this report.

Source link