JPMorgan, Balenciaga, and talent representative Creative Artists Agency have all severed ties with Ye (the artist and designer formerly known as Kanye West) following his recent anti-Semitic comments. But his largest corporate partner—Adidas—has held out, still calling the situation “under review.” UPDATE: Adidas says it has “terminated its partnership with Ye” since this story was published.
It’s been impossible to imagine the brand continuing a relationship with Yeezy in the medium to long term, given that any Fortune 500 CEO would have been fired for the comments Ye has made over the past several weeks. But I also believe that Adidas has moved slowly, and indecisively, for a reason: Yeezy has been absolutely essential for the successful turnaround of the $20 billion publicly traded shoe giant, which generates an estimated 10% of its revenue from this label within a label. And Adidas is stalling to plan its way out.
Put differently, ask yourself what it would take for Nike to drop the Jordan Brand (the closest analog in footwear, which represented roughly 13% of Nike’s $44 billion in revenue last year), and you’re getting close. But while Michael Jordan is the aspirational face of the Jordan Brand—representing the platonic ideal of an endorsement deal—Ye has represented more to Adidas: He’s an active designer and creative director behind his own products who has been key to Adidas’s design point of view. And his Yeezy line alone pulls in nearly half the total revenue of Under Armour.
THE IMPACT OF YEEZY ON ADIDAS
It’s hard to remember now, but in 2014 Adidas had fallen into third place behind Nike and Under Armour in the U.S. marketplace, and the future of the German sportswear brand seemed uncertain. Adidas responded with new tactics and an aggressive restructuring. Under its newly promoted global creative director, Paul Gaudio, Adidas moved its design headquarters from Herzogenaurach, Germany, to Portland, Oregon, recognizing that the U.S.—particularly the U.S.’s Black-born streetwear culture—was the center of the sneaker world.
Instead of just focusing on the alluring power of athletes, Adidas had already begun its shift to wooing creatives. It first signed a deal with Ye in 2013, and then a deal with Grammy-winning musician Pharrell Williams in 2014, acknowledging that the future of shoe design was as much about the arts as it was sport. The effects were swift. By 2016, Adidas agreed to pay Ye royalties on Yeezy releases, the Yeezy 350 v2 (the most famous Yeezy silhouette to this day) launched, and Adidas took second place back from Under Armour.
Adidas didn’t invent the shoe collab, no, but the company scaled the concept with Ye and Williams to unprecedented heights—a radical strategy a decade ago, and the go-to way that sneaker companies generate hype today.
The success was not born from mere halo-effect marketing, but rather from carefully curated design strategy. Yeezy generated a line of iconic shoe silhouettes in limited colorways, and the designs were coveted by a world gone sneakerhead. To do so, Ye worked with a slew of incredible talents within his own studio. The late Virgil Abloh was said to have consulted on the 350. Salehe Bembury, currently the most in-demand sneaker designer in the world, worked for Yeezy on its lauded military boots. Steven Smith, sneaker legend and “dad of the dad shoe,” helped launch products like the 700 and the Foam Runner (the latter of which was so influential it helped repopularize Crocs and a new wave of mules).
Ye told me in 2019 that he wanted Yeezy to be “the Apple of apparel,” and that’s ostensibly what he built it to be. While the shoe industry launched countless SKUs each year, Yeezy released fewer, focused designs—all with unmissable silhouettes.
AN ALREADY SOUR RELATIONSHIP
Yet despite its financial success, the relationship between Adidas and Ye has grown more tenuous over time. Adidas has typically ignored Ye’s public rants and resulting media cycles, separating the artist from his art (or in this case, product). When Ye claimed that “slavery was a choice” in 2018, Adidas’s CEO, Kasper Rørsted, responded, “there clearly are some comments we don’t support,” before adding that Ye was “a very important part of our strategy and has been a fantastic creator.”
By 2019, Ye became a billionaire from his Adidas partnership and said he’d be willing to break their contract in order to force Adidas to move Yeezy production to America. Then, earlier this year in a series of deleted posts on Instagram, Ye called out the Adidas leadership team for stealing both his designs and his designers while alleging that Adidas had released Yeezy products in colorways he hadn’t approved. Adidas developed its own, pixelated riff on the Yeezy Slide sandal—clearly repurposing the silhouette in a cheaper, modified form factor. (Similarly, Nike sells Dunks that are essentially cheaper Jordans, and Crocs has developed products inspired by Bembury’s work for the company.)
Yet ultimately, all of these similar-ish products demonstrate something other than cutting into a designer’s royalty agreements. They demonstrate just how influential a collaboration can be on an entire sneaker company. For whatever reason you’d like to cite, the DNA of marquee, collaborative designs inevitably crops up in other new products. But that DNA allows a global sneaker brand the chance to appeal to an audience it wouldn’t otherwise reach. For Adidas to truly divorce from Yeezy, it would have to go further than simply ceasing all sales on Yeezy-branded shoes like the 350—it would have to get rid of Yeezy-inspired everything.
At the moment, Adidas simply hasn’t demonstrated that it has a post-Yeezy point of view, nor does it have an immediate option to fill the $2 billion hole that would be left without Yeezy (assuming sales stay high as Ye’s public opinion tanks—an uncertainty given that some Yeezy Gap items have already gone on sale). This hole is a pressing issue, as just like Nike and its competitors, Adidas is already facing the financial consequences of a slowing economy and is sitting on large amounts of excess inventory.
As for what could make up for Yeezy? Adidas’s Ivy Park line with Beyoncé is a marketing dream, but the scale doesn’t seem comparative, and Adidas has never disclosed revenue for that project. Its Balenciaga collab is sure to be successful, but doubtfully $2 billion successful (that’s about the fashion house’s entire yearly revenue). And Williams is still selling some great designs through Adidas, but every other shoe brand has competitive collabs dropping daily, too.
What will happen next is anyone’s guess, and I can’t help but wonder if Adidas will make a last-ditch attempt to somehow distinguish the creator from his creation, and break up with Ye without breaking up with Yeezy. But as Ye told me in 2019, referencing his own viewpoints, “This is what Yeezy is; you’re talking to a founder.” Meanwhile, Adidas’s identity is currently “under review.”
Update: While Adidas has condemned Ye’s comments and ceased production on Yeezy apparel, the German company has also claimed to be the “sole owner of all design rights to existing products as well as previous and new colorways under the partnership” and will be sharing more details on Nov 9. We have updated the headline of this article. The full press release is below.
FOR IMMEDIATE RELEASE
Herzogenaurach, October 25, 2022
adidas terminates partnership with Ye immediately
adidas does not tolerate antisemitism and any other sort of hate speech. Ye’s recent comments and actions have been unacceptable, hateful and dangerous, and they violate the company’s values of diversity and inclusion, mutual respect and fairness.
After a thorough review, the company has taken the decision to terminate the partnership with Ye immediately, end production of Yeezy branded products and stop all payments to Ye and his companies. adidas will stop the adidas Yeezy business with immediate effect.
This is expected to have a short-term negative impact of up to €250 million on the company’s net income in 2022 given the high seasonality of the fourth quarter.
adidas is the sole owner of all design rights to existing products as well as previous and new colorways under the partnership. More information will be given as part of the company’s upcoming Q3 earnings announcement on November 9, 2022.
