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HomeworldKanye and Adidas: Money, misconduct and the price of appeasement

Kanye and Adidas: Money, misconduct and the price of appeasement

TheAdidas team was huddled withKanyeWest, pitching ideas forthefirst shoe they would create together. It was 2013, and the rapper and the sportswear brand had just agreed to become partners.TheAdidas employees, thrilled to get started, had arrayed sneakersandfabric swatches on a long table near a mood board pinned with images.

But nothing they showed that day atthecompany’s German headquarters capturedthevision West had shared. To convey how offensive he consideredthedesigns, he grabbed a sketchofa shoeandtook a marker tothetoe, according to two participants. Then he drew a swastika.

It was shocking, especially totheGermans inthegroup. Most displaysofthesymbol are banned in their country.Theimage was acutely sensitive for a company whose founder belonged totheNazi Party.Andthey were meeting just miles from Nuremberg, where leadersoftheThird Reich were tried for crimes against humanity.

That encounter was a signofwhat was to come during a collaboration that would breaktheboundariesofcelebrity endorsement deals. Salesoftheshoes, Yeezys, would surpass $1 billion a year, lifting Adidas’ bottom lineandrecapturing its cool. West, who now goes by Ye, would become a billionaire.

Whenthecompany endedtherelationship last October, it appeared to betheculminationofweeksofWest’s inflammatory public remarks — targeting Jewsanddisparaging Black Lives Matter —andoutside pressure onthebrand to cut ties. But it was alsotheculminationofa decade of Adidas’ tolerance behindthescenes.

Inside their partnership,theartist made antisemiticandsexually offensive comments, displayed erratic behaviorandissued ever-escalating demands, a New York Times examination found. Adidas’ leaders, eager for the profits, time and again abided hismisconduct.

While some other brands have been quick to end deals over offensive or embarrassing behavior, Adidas held on for years.

This article isthefullest accounting yetoftheir relationship.TheTimes interviewed currentandformer employees of Adidas and of West and obtained hundredsofpreviously undisclosed internal records — contracts, text messages, memosandfinancial documents — that reveal episodes throughout a partnership that was fraught fromthestart.

Just weeks beforethe2013 swastika incident,theTimes found, West made Adidas executives watch pornography during a meeting at his Manhattan apartment, ostensibly to spark creativity. In February 2015, preparing to showthefirst Yeezy collection at New York Fashion Week, staff members complained that he had upset them with angry, sexually crude comments.

He later advised a Jewish Adidas manager to kiss a pictureofAdolf Hitler every day,andhe told a memberofthecompany’s executive board that he had paid a seven-figure settlement to oneofhis own senior employees who accused himofrepeatedly praisingthearchitectoftheHolocaust.

Againandagain, West contended that Adidas was exploiting him. “I feel super disrespected in this ‘partnership,’” he said in one text message. He routinely sought moremoneyandpower, even suggesting that he should become Adidas’ CEO.

His complaints were often delivered amid mood swings, creating whiplash fortheAdidas team working with him. Diagnosed with bipolar disorder, he at times rejectedtheassessmentandresisted treatment.

As Adidas grew more reliant on Yeezy sales, so did West. In addition to royaltiesandupfront cash,thecompany eventually agreed to another enticement: $100 million annually, officially for Yeezy marketing but, in practice, a fund that he could spend with little oversight.

In a statement totheTimes, Adidas said it “has no tolerance for hate speechandoffensive behavior, which is whythecompany terminatedtheAdidas Yeezy partnership.”Thebrand turned down interview requestsand, citing confidentiality rules, declined to comment on financial aspectsofthecollaborationandAdidas’ relationship with West.

West declined interview requestsanddid not respond to written questions or provide comments.

Aftertherelationship rupturedandYeezy sales came to a halt, both Adidasandthemusician were hit hard.Thecompany projected its first annual loss in decades. West’s net worth plummeted.

But they had at least one more chance to keep makingmoneytogether.

Thecompany announced in May that it would begin releasingtheremaining $1.3 billion worthofYeezys from warehouses aroundtheworld.

TheYeezy debut at New York Fashion Week in 2015 was a displayofstar power.Thefront row was packed with Jay-Z, Beyoncé, Rihannaanda clusterofKardashians.Theevent streamed in movie theaters aroundtheworld.

It was exactly what West —andAdidas — had wanted.

Thecompany’s roots stretch back nearly a century, when Adi Dassler began making athletic shoes inthelaundry roomofhis family’s Bavarian home. Like many business ownersofhis era, Dassler joinedtheNazi Party. After World War II, he founded Adidas, which went on to capture muchofthesoccer-based market in Europeandmade inroads in America as hip-hop stars helped popularizethebrand.

But everything changed after Nike signed an endorsement deal in 1984 with an up-and-coming basketball player named Michael Jordan. That partnership would help turn sneakers into cultural currency aroundtheworld.AndNike, making billionsofdollars a year from Air Jordans, became No. 1.

By 2013, Adidas had just 8 per centoftheUS athletic footwear market, compared with Nike’s nearly 50 per cent, according to industry data,andit was losing hopeofcatching up.

West was also feeling stalled.

Raised in Chicago by his mother, an English professor, he achieved early success producing music for Jay-Zandother artists before becoming a rap star. His 2004 debut album, “TheCollege Dropout,” was considered game changing for hip-hop, for its cutting-edge productionandfor West’s middle-class viewpointandpreppy-meets-street style. But West had struggled to break into fashion, despite his burning ambition to design.

In a phone call inthesummerof2013, West told Jon Wexler, then Adidas’ global directorofentertainmentandinfluencer marketing, that he was determined to become a partner in designing shoes.

Adidas took a big swing, offeringtherapper a contract through 2017 withthemost generous terms it had ever extended to a nonathlete. It went far beyond typical celebrity licensing deals. West, then 36, would become a co-creatorofshoeandclothing lines, collecting a 15 per cent royalty on net sales with at least $3 million a year guaranteed.

Adidas employees quickly discovered that West was brimming with ideas. They also learned that he operated unlike anyone else they had encountered.

He could be enthusiastic tothepointofcreating chaos. Early on, he showed up unexpectedly at Adidas’ New York office with his fiancee, Kim Kardashian,thequeenofreality televisionandsoon social media too,andtensofthousandsofdollars’ worthofsewing machines. It was so disruptive that he was sent to a studio across town. Once immersed inthedesign work, he so obsessed over every detail that it was hard to finish anything.

Andhe was quick to anger when frustrated. Running up againstthedeadline forthefirst Yeezy fashion show in February 2015, he lashed out, using sexually explicit language, at Rachel Muscat —therare female manager in a male-dominated industry —andother Adidas employees. Some complained abouttheverbal abuse to Adidas higher-ups, according to several membersoftheteam, who spoke only ontheconditionofanonymity because they are bound by nondisclosure agreements.

Attention quickly shifted totheshow, however, wheretheshoes drew raves. Released in limited runs overthenext few months,theshoes sold out in hours, crashing serversandsendingpricessoaring on resale sites.

First came a suede high-top, followed bytheYeezy Boost 350.The350 won top honors that year attheindustry’s annual awards ceremony, consideredthe“shoe Oscars.”

A Morals Clause

Eager to build on their success, AdidasandWest were hammering out a new contract in 2016.

Thecompany wanted to entice West into a long-term commitment. But it also wanted to better protect itself. Executives were insisting on a clause that would allow Adidas to endthedeal over a rangeofbehaviors that could threaten its reputation.

Representing West was Scooter Braun, a bulldogofa manager best known then for catapulting Justin Bieber to fame. During negotiations, Braun argued that only a criminal offense, like shooting someone, would be adequate cause for Adidas to walk away from his client.

Buttheterms Adidas wanted were standard.

West continued to show pornography to Adidas employees. They also said they had seen him drinking at work.

In interviews years later, West would reveal addictions to alcoholandpornography. He had already acknowledged his deep depression after his mother’s unexpected death in 2007.

During negotiations onthemorals clause, an Adidas lawyer, along with WexlerandJim Anfuso,thebrand’s general manager for Yeezy, refused to back down. Their position was that Adidas’ new CEO, Kasper Rorsted had to have clear-cut conditions for pullingtheplug ontheYeezy deal.

West eventually conceded on Adidas’ terms for termination: felony conviction; bankruptcy; 30 consecutive daysofmental health or substance abuse treatment; or anything that brings “disrepute, contempt, scandal” to him or tarnishes Adidas, according to a copyofthecontract obtained bytheTimes.

Theagreement was also loaded with financial incentives. The value of the deal would come to surpass thatofhis music assets, according to a Forbes assessmentofhis net worth.

Duringthenegotiations, Adidas projected that net salesofYeezys would grow from $65 million in 2016 to $1 billion by 2021; West would continue to get a 15 per cent royalty, now with at least $10 million a year guaranteed.

Thebrand was gaining ground intheUnited States; it would reach more than 11%ofthemarket bythenext spring. Adidas was offering West $15 million upfront, along with millionsofdollars in company stock each year.Thecompany also intended to dedicate 20 employees to a Yeezy unit at its U.S. headquarters in Portland, Oregon, up from just a handful.Andwhile most celebrity branding agreements were short-term, this could extend for up to a decade if it met financial targets.

West signedthenew contract in May 2016.

That fall, during his first tour in three years, his concerts took a turn.

He stunned a crowd in Sacramento, California, with a 17-minute tirade, praising President-elect Donald Trump; condemningthemedia, techandmusic industries; bad-mouthing Beyoncé;andinsinuating that Jay-Z might send “killers” after him. He cuttheshow shortand, soon after, canceled his remaining performances.

Harley Pasternak, his friendandformer trainer, arrived atthemusician’s house in Los Angeles that week to find him consumed with paranoid thoughts, including that government agents were out to get him. He was writing Bible versesanddrawing spaceships on bedsheets with a Sharpie while a handfulofworried friendsandemployees lingered nearby. When Pasternak encouraged him to come to a nearby office he owned, West emerged with suitcases packed with pots, pansandTupperware.

Pasternak, who later provided an accountoftheincident in a deposition for West’s touring company as it sought insurance payouts forthecanceled shows, took him totheoffice. A psychiatrist from UCLA Medical Centerandanother doctor were among those called tothescene. After observing West’s behavior escalate — at one point, he threw a bottle, breaking a window —thedoctor called 911.

“I think he’s definitely going to need to be hospitalized,” he toldtheoperator on a recorded call.

After more than a week inthehospital in 2016, West began taking medication to treat bipolar disorderandkept a low public profile. But bythespringof2018, he was offthemeds, insisting that they dulled his creativity. While overtheyears, he has talked publicly about having bipolar disorder, he has at other times claimed that he was misdiagnosed.

That May, he set off an uproar, saying in a TMZ interview that 400 yearsofslavery “sounds like a choice” by generationsofBlack people.

Wexler told colleagues he was urging West to apologize. But Rorsted, Adidas’ CEO, battedthecomment away. After pushing forthemorals clause in West’s contract, it is not clear whether Adidas even considered invoking it.

TheCEO’s response disturbed some Adidas employees, including intheYeezy unit. Soon aftertheTMZ interview, those employees expressed their concerns to Eric Liedtke, Adidas’ global brand managerandan executive board member. In an overwhelmingly white company, Yeezy wastherare racially diverse unit that reflectedthecustomer base.Theteam wanted to know: Did Adidas support West’s comments about slavery? Werethecompany’s European leaders blind to American race issues?

Liedtke promised that Adidas would work to address its racial diversity issues. Butthecompany did not waver in its supportofWest — not then,andnot as he expressed a troubling fixation on JewsandHitler.

In 2018, West moved his Yeezy operation to Chicago, promising to create jobs there. When RorstedandLiedtke visited that October, he raised new demands, including a seat onthecompany’s supervisory board,theroleofAdidas creative directorandmaybe even CEO.

A week later, RorstedandLiedtke described someoftheproposals to Adidas’ executive board. They focused on twoofWest’s suggestions: spinning off Yeezy into a separate company or buying him outofhis contract.Theboard also considered a third option: keepingthepartnership as planned, according to company documents.

Anfuso, general manageroftheYeezy unit, toldtheexecutives that he favored paying West to make a clean break. He feared Adidas was becoming dangerously dependent on an increasingly unmanageable partnership, he told other colleagues.

Intheend,theboard decided Adidas would continue pursuing projects to help reduce its reliance on Yeezys. But it was not prepared to alterthepartnership.

It is not clear if misgivings aboutthealliance ever reachedtheultimate decision-makers: Adidas’ supervisory board. A company spokesperson declined to answer questions about that board’s proceedings. But its publicly released annual reports reflect no discussionofproblems intheYeezy partnership until 2022.

Rorsted,theCEO until late last year; his successor;andthechairofthesupervisory board declined to be interviewed or to comment for this article, as did several other currentandformer executives in leadership roles, including Liedtke.

In 2019, West abruptly moved his Yeezy operation again, this time to remote Cody, Wyoming,anddemanded thattheAdidas team relocate. West, who had started describing himself as a born-again Christian, used “terms like ‘believer’and‘pilgrimage’” to describe those who would follow him to Cody.

West had already listed more requirements: a $1 billion advance, a 15% profit splitof“whatever KW touches,” introductions totheheadsoffactories. Then he became infuriated when he couldn’t speak immediately with Rorsted.

Weeks later, in November 2019,theCEO, along with Liedtke, Wexlerandother Adidas officials, hosted him in Portland, eager to work things out.

When West arrived attheoffice, he appeared to notice onlytheshoes liningthefloor, awaiting his approval. He began lobbing sneakers aroundtheroom. Then he stomped out.

Still,thetop executives were committed. They would help him build up a Yeezy campus in Codyandintroduce him to factory owners. Most significant,thecompany would provide West with additionalmoneyeach year.

West, who objected to advertisingandother traditional promotion, had insisted that Adidas’moneywas better spent on anything that drew public attention to him. Sotheexecutives had agreed to replacetheYeezy marketing budget with a $100 million annual fund that West could spend with less oversight.

‘Adidas Can’t Drop Me’

Last September, West arrived at Adidas’ Los Angeles office to meet with company executives.

Yeezy sales were on track to reach $1.8 billion in 2022, according to Adidas projections. West’s grievances had also multiplied.

Under their contract, Adidas ownedthedesigns they had created together — including more than 250 Yeezys. But asthecompany released shoes closely resembling Yeezys under other names, West cried theftanddemanded a cutofsales.

By then, someofhis closest contacts at Adidas — Wexler, AnfusoandLiedtke — had left,andhe appeared to have lost faith in those who remained.

So he went to war: railing on social media about the CEO and the supervisory boardandpersuading high-profile friends, like DiddyandSwizz Beatz, to threaten a boycott.

AttheYeezy fashion show in Paris in October, he posed with conservative commentator Candace Owens, who has attackedtheBlack Lives Matter movementandurged Black voters to leavetheDemocratic Party, in shirts that said “White Lives Matter” — a slogan associated with white supremacists. After she posted a photo online, fueling outrage, he berated critics who accused himofbeing racially insensitive, then engaged in hostile interviewsandsocial media posts. He called Black Lives Matter a scam. He announced he would go “death con 3 on JEWISH PEOPLE.”

During an interview onthe“Drink Champs” podcast, he spread conspiracy theories about Jews controllingtheleversofpowerandinsisted thatthepolice hadn’t killed George Floyd. Then he taunted, “I can say antisemitic things,andAdidas can’t drop me. Now what?”

Politicians, Hollywood corporate heads, fellow entertainersandJewish leaders condemnedthecomments, saying his behavior emboldened others to embrace bigotry. Kardashian, whose divorce from West would soon be final, also spoke out.

On Oct. 25, nine days after West declared that Adidas wouldn’t end his deal,thecompany did just that.

“Ye’s recent commentsandactions have been unacceptable, hatefulanddangerous,” an Adidas statement said, “andthey violatethecompany’s valuesofdiversityandinclusion, mutual respectandfairness.

Even then, West was unrepentant; inthefollowing months, he went on to explicitly state his fondness for Hitler, denytheHolocaustandtweet an image combiningtheStarofDavid with a swastika.

Andbehindthescenes,theartist fought back against Adidas.

As they began arbitration, a requirement under their contract, Adidas accused himofreducing a multibillion-dollar collaboration to “economic rubble” with his offensive comments. West charged that Adidas had devalued Yeezys, saying thatthecompany’s “greedandopportunism have no bounds.” Adidas would not comment onthearbitration, citing confidentiality.

Even as they squared off in arbitration, AdidasandWest came to an agreement that served their common interest. Starting in May, Adidas began releasingtheremaining inventoryofYeezys. A portionoftheproceeds would go totheAnti-Defamation League, another group battling antisemitismandan organization started by Floyd’s family.

But mostoftherevenue would go to Adidas,andWest was entitled to royalties.

Theshoes took in about $437 million in sales through June. Creditingtherecent Yeezy drops, along with its other products, Adidas has significantly improved its forecast fortheyear, revising an earlier projected operating lossofmore than $700 million to about $100 million.

(Published 28 October 2023, 16:33 IST)

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