If you’ve been on social media these past two weeks, you know Ye has been on a sharing spree. But before we dig into his grievances with Adidas lets first take a closer look at the partnership between the two companies and their respective brands.
Adidas
‘Why would you sign with Adidas?’
That was a recurring question about Adidas in America, and it spoke to the hurdles facing the world’s second-biggest sports brand faced as it tried to regain footing in the biggest sports market.
Mostly known for its engineering and strong ties to sports, mainly soccer on a global scale. Adidas has always struggled to connect with the American market. Sure, there was some success. Its three-striped shoes were everywhere in America in the 1970s. Industry veteran John Horan, Sporting Goods Intelligence’s publisher, estimates Adidas had the majority U.S. sports-footwear market share at the time. However, a few missteps plagued the company for decades resulting in a bronze placement in the U. S.
As Jordan prepared to go pro in 1984, it was reported that His Airness wanted to sign with adidas originally, and even adidas distributors were interested in acquiring him. However, in a move that seems preposterous in hindsight, the Three Stripes executives in Germany called it off because they thought Jordan, at 6’6″, was too short to sell sneakers. Instead, they were convinced that consumers were more interested in taller players like Kareem Abdul-Jabbar and Patrick Ewing. While both had sneakers that were successful in their own right, they can’t hold a candle to the legacy that became Air Jordan.
Adidas: The Hip Hop Transfusion
Since the Era of Run DMC, hip hop has embraced the underdog shoe behemoth. Run DMC’S 1986 hit “My Adidas, provided the company with a much-needed pop culture boost. So much so, execs offered the hip hop heavyweight a $1 million deal at their concert. The boost diverted Adidas from its sports markets, hurting business when the trend waned, say former executives and distributors. Present day, the German shoe company is now synonymous with the culture thanks to Ye’s Yeezy brand, new athletic partnerships and Beyonce’s Ivy Park imprint. Despite its historical roots in Hip Hop, nostalgia has its limits.
At the turn of the 21st century Adidas’ lack of cultural presence in the US, led to the 2006 purchase of Reebok at a 34% premium. Adidas had a deal in place with Missy Elliott whose music videos were great for promoting the retro 1980s Adidas look. But that was it. Reebok was an ideal complement. Shortly thereafter Reebok launched the ‘Rbk’ lifestyle brand teaming up with A-List rappers 50 Cent, Nelly and Jay Z, plus NBA MVP’S Allen Iverson and Shaquille O’Neal. Both athletes even created hip hop albums respectively. Reebok was definitely in tune with their target demographic. Steve Stoute who partnered with Reebok to launch ‘Rbk’ and brokered the deals with Jay Z and 50 Cent, expressed caution after the deal was made.
Treat Adidas and Reebok brands separately… There’s a potential problem if consumers see the lines being blurred, so you have to treat them as standalone brands.”
Steve Stoute [New York Times]
Under the Adidas umbrella, Reebok lost that ‘Rbk’ edge. The rappers and athletes signed, were aging out of their demographic, and the company missed out on the next generation of hip hop artists. In the process, Reeboks market share fell from 8% in 2006 to 2% in 2015. According to the Wall Street Journal, a former adidas executive told them, “From the moment we started looking at the numbers, we knew it was a screwed-up business and that we paid too much.” Clearly the statement highlights an incredible disconnect. The investment was sound, yes, they paid a lot for Reebok and its hip hop era wasn’t perfect. However, its market was oversaturated with G-Unit sneakers and S Dots, which subsequently ended up at Marshalls. The cool factor disappeared, but that doesn’t mean the deals don’t work.
Adidas’ fate didn’t change until it introduced BOOST in 2013. The new technology was a huge achievement for Adidas in running and athleisure, that same year, Adidas signed Kanye “Ye” West.
The Deals
History proves that counting Ye out in any regard is futile, as proven by his groundbreaking Adidas Yeezy line and its crowned jewel: the Yeezy Boost 350. After a very public spat with Nike, fans and detractors alike waited patiently to see how Ye would bounce back after he ended the working relationship with the Swoosh brand.
Fortunately, one door closed for another to open. On November 25, 2013, he responded to naysayers by announcing an upcoming shoe line with Adidas during an epic interview with the ICONIC radio personality, Angie Martinez – perhaps one of his biggest power moves to date.
Before he released his Yeezy Boost 350 Turtle Doves, Ye rocked the UltraBOOSTs in public, and as the saying goes, “the rest was history.” Ye was photographed with a pair of adidas Energy Boost ESMs on his feet, anticipating what would then be the turning point. The Billboard Music Awards 2015, the moment when Kanye went on stage at the MGM Grand Garden Arena with a pair of adidas Ultra Boost Triple White Triple Boost, immediately consecrating the shoes.
The UltraBOOST set the bar for how a performance shoe should feel. However, it was Ye, who embraced and brought the simple-but complex design into the world of style. In 2015, it became the most talked about shoe despite the release of the BOOST equipped Yeezy 350. Thanks to both offerings though, Adidas gained market share, increased revenue, sold more product and found itself back in the game with Nike.
Ye made headlines when he took his creative talents to Adidas, leaving behind Nike amidst the imminent arrival of the now iconic Yeezy 2 ‘Red Octobers’. The switch from Nike to Adidas wasn’t only brave but unprecedented. Ye inked a deal that would see him receive a 15% royalty rate and creative control of his designs. This was unheard of period, let alone for a non-athlete. Michael Jordan only receives a 5% royalty rate for his Jordan Brand. For those who aren’t familiar with the iconic shoe collection, here’s a snapshot of the Yeezy offerings thus far.
The Product
If it weren’t for the UltraBoost serving as a proper intro to the Yeezy Boost, there’s no telling where Adidas would be today. The deal was a perfect balance between execution and luck – two things that the brand lacked in the early 2000s. Ye provided the company with exposure, his Yeezy line already had a cult following.
Nike Air Yeezy Snapshot
The Nike Air Yeezy was developed from 2007 to 2009 by Ye, Nike Creative Director Mark Smith and later Nathan Van Hook. Kanye has spoken very highly of Smith as both a collaborator and designer. Smith has said the same of Kanye, stating that he is “a truly creative talent” and a “natural designer.”
After the long sampling process, three colorways of the Nike Air Yeezy were chosen for public release; a “Zen Grey” colorway that released on April 4, 2009 and was the colorway created after almost equal input from Smith and West, a “Black/Pink” colorway (often referred to as the “Blink” colorway) which was more the brainchild of Mark Smith, released on May 4, 2009, and finally a “Net” colorway that reflected more of Kanye West’s design tastes and released on June 1, 2009. Each colorway had a suggested retail price of $215 and sold out almost immediately.
Anticipation around the release of the Nike Air Yeezy 2 started after a Complex Magazine interview with Mark Smith and Ye about designing the Nike Air Yeezy, wherein Ye stated that there were several designs left over from the Air Yeezy design process that could eventually become the Nike Air Yeezy 2. Despite this statement, none of these designs were used for the Air Yeezy 2, and instead, Nathan VanHook sat down with Ye to design the Yeezy 2. The shoe features more of an animalistic design inspiration than the original Air Yeezy, sporting a ridged, reptile inspired heel counter and a snakeskin inspired design on the quarters. The shoe, like the original Air Yeezy, borrows tooling from other Nike models. The Air Yeezy 2 borrows its sole unit from the popular Nike Air Tech Challenge II tennis model. The shoe also features several references to Egyptian culture, featuring depictions of the god Horus on the tongue and insole, and using Egyptian hieroglyphics that spell out “YZY” under the strap.
There were also several design decisions during the making of the Nike Air Yeezy 2 that were a direct response to some of Kanye’s issues with the initial Nike Air Yeezy. First, the unnecessary padding along the upper was removed, and the shoe was made shorter for greater mobility. Also, the shoe was purposely slimmed down, to create a thinner look on feet and better fit Kanye West’s foot. Amid wide anticipation, the shoe was released with 5000 of each color way on June 9, 2012. While sold for a retail price of $245, the shoe gained notoriety for its wildly inflated resale value upwards of $4,000. The Air Yeezy II featured two premier color ways, Solar Red, Pure Platinum, and a third color way of the Air Yeezy II shoes, dubbed the “Red Octobers”, which underwent a surprise release on February 9, 2014. The “Red Octobers” released exclusively on Nike’s website and sold out within seconds.
In early 2020 while speaking to GQ Magazine, West stated that he was open to the idea of a retro release of the Air Yeezy line.
In April 2021, the Nike Air Yeezy 1 prototypes, worn by West during his 2008 Grammys performance, sold for a record $1.8 million.]
Video: Grammy Acceptance Speech
The Air Yeezy 1 prototypes beat the previous sneaker sale record which was held by a pair of 1985 Nike Air Jordan 1s that auctioned for $615,000. Additionally, the Air Yeezy 1 prototypes became the first pair of sneakers to top $1 million dollars in a sale. Brahm Wachter, head of streetwear and collectibles at Sotheby’s, stated the price “speaks volumes of Kanye’s legacy as one of the most influential clothing and sneaker designers of our time, and of the Yeezy franchise he has built which has become an industry titan.”
The Halo Effect
Andy Barr of Adidas
Adidas had landed one of hip hop’s most iconic entertainers to wear their Ultra Boost and by leveraging his own brand, Ye became one of Adidas’ strongest ambassadors. Ye praised Adidas and chastised Nike any chance he could. In the age of social media, what more could Adidas ask for. In 2015, Ye sold just 9,000 pairs of Yeezy’s in his first drop. Scarcity was important, but he also insured his fans that the product would soon be available for all.
“Eventually, everybody who wants Yeezy’s will get Yeezy’s. Adidas has promised me that. Because there’s some many kids that have wanted them that couldn’t get them. I talked to the head of Adidas and they said, we can make them.”
– Ye [On Air With Ryan Seacrest]
Internally Ye’s claims shored up concerns. Adidas was notorious for missing the mark with American consumers. Would Yeezy’s repeat previous mistakes and flood the market? Can an artist led sneaker become a mass market leader and maintain its cool? Well in 2018 Ye kept his word. The Yeezy Triple Whites released an alleged one million pairs.
Adidas successfully navigated the economics of hype. Scarcity drives hype, but the limited revenue makes it difficult to generate revenue from volume. Companies love building hype, about almost as much as cashing in on it. In 2018 Yeezy became the nineth- highest grossing sneaker in the U.S.
Adidas CEO Kasper Rorsted saw the success, but still wont mass produce the shoes. he told Forbes,”
We are continuing to manage volumes in a very disciplined manner so that for 2019 Yeezy sales will not make up a significant share of Adidas’ overall expected sales growth. Not because brand heat is decreasing, but because we have a disciplined approach to managing volumes and product life cycle.”
Kasper Rørsted CEO, Adidas [Forbes]
This exact formula laid the foundation for Beyonce’s confidence in the company – leading to the Adidas/Ivy Park collaboration. Thats a conversation for another day though.
On June 13, Ye addressed his disdain for the Adilite slides that look very similar to the Yeezy Slide.
Fast forward to August, as fans were prepping for Yeezy day, monopolizing electronic devices and refreshing the CONFIRMED App, Ye took to social media, dming fans and blogs alike, to convey ‘Yeezy Day’ isn’t a Ye approved event. He went on to explain Adidas released new colorways and named them without his approval.
Adidas CEO Kasper Rørsted was asked during an interview about his working relationship with Ye. Check out his response below.
Shortly after this interview, the clip made its rounds on the internet and on August 22, 2022, Adidas announced Kasper would be stepping down as CEO. In the official press release announcing his departure Kasper is credited for growing the online presence of the brand and developing technological innovations.
Under Kasper’s leadership adidas has substantially advanced its digital capabilities and grown its online sales by a factor of more than five. In North America, the world’s largest sporting goods market, adidas has doubled its sales.
Thomas Rabe, Supervisory Board Chairman [Adidas]
The Numbers
According to Ye, Yeezy represents 68 percent of online sales for the parent brand. In 2019 Yeezy reportedly generated 1.3 billion in revenue. “Sales for Yeezy’s adidas sneakers remained resilient through the pandemic, growing 31 percent to nearly $1.7 billion in annual revenue last year and netting Ye, $191 million in royalties,” Bloomberg reported, citing the UBS report.
Well it doesn’t stop there. Over the past week, Ye has been sharing his disappointment in his partners Adidas and Gap. Alleging breach of contract among other things, leading to Ye sharing how he intends to open his own Yeezy branded retail locations.
In his most recent cache of posts Ye also said that Adidas failed to meet production goals and bullied partner Gap in the process.
In the midst of his posting spree, Ye introduced us to the Supervisory Board overseeing operations, shared new product designs, addressed Instagram posting policies, and last but not least, introduced us to Daniel “DC “Cherry. Now collectively, we were all thinking, who is this guy?
Daniel Cherry was appointed SVP and General Manager of the Adidas in January 2022.According to Ye, Daniel was appointed as a “handler’ to oversee the Yeezy Brand on behalf of Adidas. Daniel previously served as SVP and General Manager during a period of downsizing and restructuring at DC Comics, internally known as the “bloodbath”. After 18 months, his departure was characterized as “quitting’, while the exact reasons aren’t clear. Rumors surfaced that he was being headhunted by Ye, due to his background and unique skill set. They also previously worked on a 2006 Nike campaign spawning, a Grammy nominated, collaboration, “Classic” featuring Ye, Nas, KRS-One, and Rakim.
Ye shared on Instagram, Daniel Cherry allegedly threatened him and tried to emotionally black mail him in a meeting.
At this point, Ye’s position is simple. He wants out of his adidas contract and he’s ready to start again.
Breaking down the Deal(s)
Bloomberg wrote that “West’s partnership with adidas AG, which manufactures and distributes the Yeezys, is more of a profit-sharing agreement than a typical licensing deal.” In furtherance of the agreement, one that is set to end in 2026, “Ye has “creative control over designs, while Adidas handles fulfillment and production.”
As for how these deals work from an intellectual property-ownership standpoint, it remains true that West maintains control of Yeezy, or more specifically, the trademark rights upon which the brand has been built, and upon which its partnerships so heavily depend. To breakdown is essentially this: Ye’s Mascotte Holdings is the sole holder of the trademark rights in (and registrations for) “Yeezy” and “YZY” for use on footwear and apparel, which Ye’s corporate entity then licenses to adidas for use in connection with the footwear collection, and to Gap. This enables Ye to monetize this intellectual property (and bring in royalties), while still maintaining complete ownership over the identity of the venture.
In terms of the long-running deal between Ye and Adidas, the sportswear titan is not without rights of its own. For instance, Adidas holds the rights in the Yeezy footwear designs, themselves, with adidas designers Nic Galway and Aurelien Longo listed as inventors of design patents for the Yeezy 750 Boost; and Galway, alone, listed as the inventor of the patent-protected classic Yeezy boost sneaker and variations thereof. All of the patents, and a similar copyright registration, are assigned to – and thus, owned by – adidas, and West receiving royalties based on sales in connection with the use of his Yeezy marks. Hence, the $191 million check Ye received from adidas in 2020 or the $500 million he alluded to in a recent post.
On September 5, Ye posted that his team were happy that they received favorable correspondence from Adidas.
Its unclear whether Ye is going forward with purchasing his own company for manufacturing and shoe production or whether outstanding issues have been resolved. One thing is for certain, the hip hop community and Yeezy fans are ready to support Ye in whatever capacity is needed to protect his intellectual property, setting new precedent for all fellow creators in the process.
#For the Culture 🕊
Keep this same energy Adidas.
On September 14, Ye made an appearance on CNBC’S closing bell to discuss his partnerships with Gap and Adidas, Check out what he said below.
– The Pen
This story is still developing, stay tuned for updates. Hit me up if you have any tips at thepen@infinitepressure.org
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