Written by Julie Tolek:
In the latest series of unfortunate events, where pop culture meets morals meets capitalism, at the intersection of doing what is right versus doing what is profitable, Ye (formerly known as Kanye West) and a list of brands affiliated with him have found themselves at a crossroads. In recent weeks, Ye has once again created controversy, in typical Ye fashion (pun intended), but this time with anti-Semitic and anti-Black remarks leading to his co-branding partners placing morality ahead of profits and severing ties with the artist.
With a history of strained relationships with his co-branding partners, the list of companies and brands cutting ties with Ye and the Yeezy brand includes Gap, Balenciaga, JP Morgan Chase, MRC (who also scrapped a documentary about Ye), CAA (Ye’s own agency had had enough), Foot Locker, TJX brands, Madame Tussauds London, The Real Real, and Adidas. Additionally, the lawyers who represented him in his divorce from Kim Kardashian, along with Camille Vasquez, who was among a group of attorneys representing Ye in his business interests (and who famously represented Johnny Depp in his defamation trial against Amber Heard) dropped him.
Although Ye has had a strained relationship with Adidas for some time, Adidas was slow to act here, drawing attention to the company’s Nazi ties and dark history, which definitely doesn’t help the public’s response to its delayed reaction. It is estimated that Adidas’ Yeezy line was generating $1.8 billion in annual sales, more than 40% of the company’s profits, and that the split will cost the sneaker giant 250 million euros ($248 million) this year. It is speculated that this financial blow is what made Adidas hesitate in taking action. But the damage is mutual – Forbes says the artist’s net worth is down $1.5 billion, making his net worth now only $400 million.
Intellectual Property and Licensing Agreement
Adidas can’t just take its sneakers and go home; the entanglement of intellectual property rights (IP rights) between the sneaker company and the rapper is pretty gnarly. While Ye’s company, Mascotte Holdings, Inc., holds a portfolio of at least 160 trademark applications and registrations for his Yeezy brand, Adidas owns the rights to the actual designs of most “Yeezy” branded shoes. US Patent filings indicate the Yeezy Boost 350, for example, was created by Nic Galway, Adidas’ Vice President of global design, while Ye did obtain a design patent for the Yeezy Slide in 2020. This IP ownership structure is the basis for licensing terms between Ye and Adidas, entered into in 2016. This means that Ye is licensing his Yeezy name and brand – his trademarks – to Adidas to put on their footwear and apparel.
Because of the licensing agreement between the two, Adidas likely will owe Ye any outstanding royalties for products sold under his brand(s) up to the date of termination of their agreement. Adidas could attempt to sell the shoes without using any of Ye’s brands, but the commercial impression of that particular design with Ye, his brands, and his anti-Semitic statements has probably already left a bad taste in people’s mouths. This in and of itself calls into question just how valuable (or not) the designs for the shoes really are.
This is not the end
Let’s not forget that Yeezy branded footwear is already out in the stream of commerce. Even though co-branding relationships have been terminated and stores are pulling the product off shelves, the resale market runs deep; some might see Yeezy branded Adidas sneaker ownership as a novelty, and one they are willing to invest in. According to The Wall Street Journal, the split with Adidas has skyrocketed Yeezy resale prices.
It will be interesting to see how this plays out for both Ye and Adidas. Who will make it out of this “alive” and how will this affect celebrity co-branding relationships going forward? Only time will tell, but this is not likely to be the last we hear about either of them.