Here’s a conundrum: Should bad behavior be tolerated when profits are soaring? The Ye and Adidas relationship is a cautionary tale about the temptation to trade erratic behavior for crazy revenues. During a near decade-long partnership between Kanye West and Adidas, the Yeezy brand brought in Adidas a billion dollars a year and made Ye a billionaire. But at what cost?
Join Robin and Shelley as they dissect the business risk of doing business with controversial celebrities.
Why did Adidas put up with inappropriate, off-the-rails behavior?
And why was Adidas hostage to Ye’s downward spiral of hate speech? Motivated by pure profit?
And then there’s the anti-Ye, everyone’s role model: Michael Jordan and Nike. Listen to this fascinating conversation about complex business decision-making that pits profits against ethics.
For more strategic insights and compelling content, visit TheRobinReport.com, where you can read, watch, and listen to content from Robin Lewis and other retail industry experts, and be sure to follow us on LinkedIn and Twitter.
Here’s a conundrum: Should bad behavior be tolerated when profits are soaring? The Ye and Adidas relationship is a cautionary tale about the temptation to trade erratic behavior for crazy revenues. During a near decade-long partnership between Kanye West and Adidas, the Yeezy brand brought in Adidas a billion dollars a year and made Ye a billionaire. But at what cost?
Join Robin and Shelley as they dissect the business risk of doing business with controversial celebrities.
Why did Adidas put up with inappropriate, off-the-rails behavior?
And why was Adidas hostage to Ye’s downward spiral of hate speech? Motivated by pure profit?
And then there’s the anti-Ye, everyone’s role model: Michael Jordan and Nike. Listen to this fascinating conversation about complex business decision-making that pits profits against ethics.
For more strategic insights and compelling content, visit TheRobinReport.com, where you can read, watch, and listen to content from Robin Lewis and other retail industry experts, and be sure to follow us on LinkedIn and Twitter.
Robin Host 00:00
Hi everybody and thanks for joining our weekly podcast. I'm Robin Lewis, founder and CEO of the Robin Report, which, by the way, is much more than a daily report. It's really a knowledge platform, as we see it, from which we do communicate thought leadership on various strategic topics, yes, through our daily reports, but also these podcasts, webinars and, maybe in the future, some live events and, along with Shelley Cohen, my weekly podcast partner and, by the way, she's also a professor at Fashion Institute of Technology, we welcome you to our conversation. And today, Shelley, it's something a little bit different and really kind of astounding.
00:55
And it really comes from a great job of investigative journalism by Megan Tuwe for the New York Times, and the title of her article is Kanye and Audidats Money Misconduct and the Price of Appeasement. I'm going to tell you, Shelley, that article, as you know, revealed a heck of a lot more about Kanye West than had previously been reported. You know well beyond his sneaker escapades, you know, while a partner with Audidats, at one point with Old Navy, who's CEO then, Sonya Single, she signed on for big bucks for 10 years for an exclusive arrangement for his Yeezy brand of sneakers.
Shelley Co-Host 01:53
I remember that that was a big deal.
Robin Host 01:56
Big, big deal and the line of which soon became kind of waiting for Godot, you know I mean. And what that meant is that Old Navy was expecting new line releases on a certain date and on a regular basis. Then, upon endless delays, Single then having, by the way, been promoted to Gap Inc Gap Inc as CEO, Then, after all these delays of the new Yeezy brand, she, along with Old Navy's CFO, had to tiptoe in their quarterly analyst meetings with all kinds of excuses for Yeezy's delayed releases. Anyway, shall I give you that Old Navy example which you probably remember, the Yeezy deal, of which was likely part, probably the part one of the reasons for Single's promotion to Gap CEO. In other words, she moved up from Old Navy CEO to the Gap Inc CEO and part of that may have been because of this look like such a big deal for Gap Inc. Ironically, it may also have been part of the reason for her rather very swift departure. She left in less than a year after that big fiasco.
03:28
Anyway, well, Tue's article in the Times did not cover the Old Navy ill-advised deal and that was surely due to Kanye's really erratic and somewhat not somewhat really irresponsible behavior, both publicly and with his Adidas partner and you know, show you. This also reminds us of the risks associated with celebrity endorsements. You know, or like the partnership deals Adidas and Yeezy? No, and listen, it's totally opposite to the Yeezy Old Navy experience and other Kanye Adidas negative disruptions, which we're going to discuss in a few minutes, was the unprecedented, explosive Nike and Michael Jordan endorsement. You remember that not only was there a rock-solid relationship, largely due to Jordan's mother's tenacious negotiating on her son's behalf, negotiating with Nike's C-level leaders.
Shelley Co-Host 04:45
I just love that Was it great yeah.
Robin Host 04:49
And, of course, Jordan’s mother was actually his guiding light for good behavior throughout most of his career. And, if you can see all of it, if you check out the movie Air, aptly titled, since his brand was Air Jordan. Indeed, Jordan often looked for those of you you know who have to see him play he often looked as though he was flying through the air to slam, dunk a shot. Yep, I mean, you remember that?
Shelley Co-Host 05:23
Oh sure Are you kidding me. Greatest of all time, yeah, yeah, like literally the greatest of all time, exactly.
Robin Host 05:31
Another interesting story about the Gap fiasco which I added to an article I wrote on it was the fact that Mickey Drexler, the iconic CEO of Gap Inc, who actually led its incredible growth years, he met with Kanye, who is which he was fairly friendly with before the old Navy deal was signed.
05:58
And here's what Mickey had to say about this move. He said I probably shouldn't say this, but I told him Kanye West, you know, being Kanye West he shouldn't do the deal because it doesn't make any sense in my opinion. I have a lot of friends at the Gap still, but it doesn't work for someone like Kanye. He is not a corporate person and Gap is a big corporation. Right, you know, Kanye’s a smart guy, he said, but he shouldn't have done it. I have done it and I don't think Gap or Old Navy should have done it either. So, Shelley, you know, what was out there in the oxygen, so to speak, was that while Adidas and Kanye West produced hundreds of shoe styles and made billions of dollars together notwithstanding Old Navy of course Adidas broke the relationship because of West's anti-Semitic and other very offensive public comments, you know. But two East Times article goes deeper into the weeds really about their relationship and really has some pretty astounding, actually revealing and kind of you know frightening stuff.
Shelley Co-Host 07:29
It really does, Robin. I mean, that article is full of red lights everywhere and it's really about you know. The decision to partner with another brand or celebrity endorsement should be made very cautiously, with all the risk checks off, so to speak. The article said that Adidas have been tolerating Kanye's misconduct behind the scenes for nearly a decade Ten years and I found it kind of interesting when the New York Times called Adidas for a comment. The comment they gave him was that Adidas has no tolerance for hate speech and offensive behavior and that's why we terminated the Adidas-Adidas and Easy Partnership. But to be honest, Robin, it went on, like you said, for ten years.
08:17
So I believe that statement that came out from the company, but it's likely that Adidas tolerated some really crazy stuff coming out of West. A big part of the tolerance had to do with follow the money. Follow the money, you know capitalism at its finest. The year-long partnership between West and Adidas yielded over 250 styles of shoes. Yeah, God it would include sneakers, slides, boots, and that would yield Adidas over a billion dollars a year, increasing its bottom line, and it would recapture its cool, you know, trying to keep up with the bikes of Nike right.
Robin Host 08:58
Yep.
Shelley Co-Host 08:59
So it would also promise that the celebrity endorsement deal would break the boundaries. Only the second most lucrative sneaker brand to the Nike Jordan deal and Yee Kanye, nicknamed Yee, would become a billionaire as a result of that partnership Incredible.
Robin Host 09:18
Thank you.
Shelley Co-Host 09:19
But you know, Robin and wait.
Robin Host 09:21
I also think at that time Shelley, you probably know better than I think how did us was really in kind of a declining yes mode when they hooked up with Kanye right.
Shelley Co-Host 09:34
Yes, they were yeah.
09:36
Yeah, but the crazy part is, I mean from day one of their negotiations with Kanye West. Here's what the New York Times article reported the Adidas team was huddled with Kanye West pitching ideas for the first shoe they would create together. Of course, this was back in 2013. And the rapper and the sportswear brand had just agreed to become partners. The Adidas employees, thrilled to get started, had an array of sneakers and fabric swatches along a long table near a mood board pinned with images in the you know how we do the product development process. But nothing they showed that day in the company's German headquarters captured the vision Mr West had shared. To convey how offensive he considered the designs, he grabbed a sketch of a shoe and took a marker to the toe, and, according to two participants in that meeting, he then drew a swastika.
Robin Host 10:32
Unbelievable.
Shelley Co-Host 10:34
It was shocking, especially to the Germans in the group. Most displays of the symbol are banned in their country and the image was acutely sensitive for companies whose founder actually belonged to the Nazi party.
Robin Host 10:47
Yeah, which I didn't know, Incredible.
Shelley Co-Host 10:49
Yeah, and they were meeting just miles from where leaders of the Third Reich were tried for crimes against humanity. So this is really mind blowing and it should be a huge signal that Adidas should think about At that time. They should have just terminated that deal on the spot.
Robin Host 11:09
Why did they not? Anyway, I agree, Shelley, when the relationship ended, it had been the culmination of weeks of such inflammatory public remarks targeting Jews and disparaging also Black Lives Matter. But this, Shelley, this was only the tip of the iceberg. It really gets worse. It was also the culmination of a decade of Adidas' tolerance behind the scenes, inside of their partnership. The artists made anti-Semitic and sexually offensive comments and displayed, you know, erratic behavior almost all the time and also issued ever-escalating demands. The New York Times examination found Adidas' leaders eager for the profits time and again. As you mentioned, here we go capitalism, the bottom line, money, money, money. So they kind of allowed his misconduct. You know they reported that he would explode in bitter outbursts at Adidas' managers. Yet you know they would appease him Not only that, but would sweeten his deal. Actually, doubly Unbelievable.
Shelley Co-Host 12:39
Yeah, it's incredible.
Robin Host 12:43
You know, they stepped up production also and released easy lines more frequently. So Adidas' managers' concern really began to mount that he might change the brand's reputation. Oh really, and it just gets worse, Shelley. I mean, this partnership was fraught from the get-go. I mean, listen to this. Just weeks before the 2013 Swastika incident, the Times found Mr West made Haudenosaunee executives watch pornography during a meeting at his Manhattan apartment, ostensibly to spark creativity. I mean, this wasn't so ridiculous. It's laughable. In February 2015, preparing to show the first Yeezy Collection at New York Fashion Week, staff members complained that he had upset them with angry, sexually crude comments.
Shelley Co-Host 13:56
Yeah, Robin, this is really raw bad stuff. Hard to believe it actually happened. He advised a Jewish Adidas manager to kiss a picture of Hitler every day.
Robin Host 14:10
Unbelievable.
Shelley Co-Host 14:11
And he told a member of the company's executive board that he had paid a seven-figure settlement to one of his own senior employees. He accused him of repeatedly praising the architect of the Holocaust.
Robin Host 14:26
It doesn't get much worse than that, does it?
Shelley Co-Host 14:28
It's just sick. But West turned the tables again and again. He contended that Adidas was exploiting him. I feel super disrespected in this partnership, he would say. In one text message he said I never felt understood. He wrote in another one all kinds of this disparaging comments and he routinely sought more money and power, even suggesting that he should become Adidas' chief executive.
Robin Host 14:58
Can you believe this? Yeah, that's why we're doing this podcast.
Shelley Co-Host 15:04
And he's got some serious problems. And you know what? He was diagnosed with bipolar disorder, but he resisted treatment. So I mean meeting with Adidas leaders in November of 2019 to discuss his demands. He started hurling shoes around the room A month before that and an internal text message described him becoming quote unquote fully, fully ramped up and charging. This is slavery, an accusation he leveled multiple times during the partnership. But as Adidas grew more reliant on those easy sales, so did Mr West. In addition to royalties and upfront cash, the company eventually agreed to get this. Robin, here's an enticement for you A hundred million dollars in annual money that it should be used for easy marketing. But in practice, that fund, he could really kind of spend it with a little oversight.
16:01
Incredible so Robin just a remarkable piece of investigative reporting and, as you know, this is also a failure of Adidas to catch on to this what would be a major problem from day. They knew this day one.
Robin Host 16:17
Yeah, they did, and I'm going to tell you, Shelley, capitalism money the root of all evil. So they say. But good, capitalism, of course, is a big strength of democracy. Anyway, these celebrity endorsements really can come off the rails with erratic behavior such as this, but there are others that become problematic, you know, when the celebrities values go against the behavior of the exhibit. I mean, we can go back over a decade to remember the Lance Armstrong endorsements. Yeah, remember that when he was under fire for doping, which, by the way, he later admitted he lost all of his endorsements to then the tune of seventy five million dollars in sponsorship deals.
Shelley Co-Host 17:14
Wow. Well, social media certainly played a role in the crash of many of these kind of types of agreements. You recall, in twenty eleven this was a big deal.
17:23
You know, Christian Dior had to fire British designer John Galliano who was accused of making anti-Semitic and racist comments, and the reason this got caught is because it was caught on video by someone and, by the way, it's against the law where he was at. So Dior really had no choice but to fire Galliano. But you also have celebrities that are not holding true to the brands they're endorsing. Here's a more recent one.
Robin Host 17:52
You know that world's famous soccer player, Cristian Ronaldo, Well, I'm not up to soccer as much as you, but, and your and your kids? Yeah, I vaguely remember the guy. Yeah.
Shelley Co-Host 18:04
Yeah Well, listen to this. He's the most followed person, like literally the most followed person, across all social media platforms in the world.
Robin Host 18:16
Wow.
Shelley Co-Host 18:17
He has eight hundred and seventy-six million followers Incredible. So just to give a little background, so Coca-Cola is a major sponsor of the UEFA Euro 2020 tournament, but Cristiano felt it was important to point out during his press interview that he doesn't touch that stuff, meaning the Coca Cola, he prefers to drink water. So in the middle of a press conference, in twenty twenty one, Cristiano removed a pair of Coke bottles from the podium of a press conference and that move of him just, you know, kind of pushing in an aggressive way, just getting rid of the Coke that was sitting there, because they're sponsors that cost Coca Cola more than five billion dollars.
Robin Host 19:04
You're kidding.
Shelley Co-Host 19:05
And What’s interesting about this story is Ronaldo had been happy to endorse soft drinks in the past, because he did work for Coca-Cola in the past in China in the mid 2000. He also worked for Pepsi.
Robin Host 19:21
Well, you know, Shelley, the athletes seem to have an issue even before social media. Right, I mean Tiger Woods, and I don't need to explain that one?
19:32
I don't think, but that story goes on and on. I mean, back in 2009, companies that he endorsed lost more than two percent of their market value Nike, PepsiCo, Electronic Arts, and there were more. And Michael Phelps around the same time. Michael Phelps was the Olympic, you know, the gold medal, olympic swimming winner. He was caught smoking weed and the companies he was brand ambassador for they dropped him, you know, like a smoking gun, if you will. I mean, there was Subway involved, Kellogg, AT&T and this was not via social media, but when a photographer caught him smoking marijuana and the news of the world rented the picture, um, That'll do it, Robin, yeah.
Shelley Co-Host 20:38
Yeah so picture paints a thousand words, so they say right.
Robin Host 20:42
Yeah, so it's, it's incredible, but you know, again, I wonder if today that marijuana thing would have been as serious as it was at that time.
Shelley Co-Host 20:55
Yeah, no, you're exactly right, Robin. I have one. I have an example that I find really super fascinating. This one goes back 34 years, 34 years. Yeah so way back in 1989, Madonna started a Pepsi commercial.
Robin Host 21:12
Right.
Shelley Co-Host 21:13
And but that Pepsi commercial was never aired.
Robin Host 21:17
They cut it.
Shelley Co-Host 21:18
They canceled it before even aired. And what's interesting is, Madonna shared the commercial on Instagram, saying that 40 years later it was canceled. Pepsi was finally revealing the commercial and the commercial came out with her like a prayer music video and that video was a bit controversial and, as Madonna puts it in her own words, the commercial was immediately canceled. When I refused to change any scenes in the video where I was kissing a black saint or burning crosses, she wrote Instagram. So began my illustrious careers and artists, refusing to compromise my artistic integrity and then, she thanked Pepsi for finally realizing the genius of our collaboration.
22:02
Artists are here to disturb the peace, so I don't know, did Pepsi make the right call back then? I mean probably. I mean you have to look at the sign of the times, right?
Robin Host 22:13
What's the?
Shelley Co-Host 22:13
social norms of acceptance by showing that video. Would Pepsi had the same backlash at that time as Bud Light had today? In our present time, we probably will never know, but here's what I will tell you. Robin, Madonna and Pepsi have done really well financially over the past 34 years, both making lots of money.
Robin Host 22:34
That's for sure. That's for sure. But the big question is would that have been tolerated today? Perhaps? You know we know that public backlash can also impact endorsements. You know the Bud Light situation was based on marketing executives that were not truly in tune with their target audience. You know, when the transgender influencer Dylan Mulvaney promoted the the Bud Light Instagram, conservatives called for a boycott. The company used Mulvaney in marketing efforts and when the backlash came on strong, the light back down, put the marketing executive on leave and it cost Bud Light about three hundred and ninety five million dollars in lost US sales.
23:33
I mean it says you have to understand your target market.
Shelley Co-Host 23:37
You sure do. Here's another one of my fan favorite celebrity collaborations gone wrong. So you know basketball player LeBron James, of course, who doesn't? He's well known for his partnership with the phone manufacturer Samsung, so he's appeared in commercials and he's been seen with the products. So, of course, samsung is trying to win market share away from Apple. Well, when LeBron Samsung phone had a meltdown, he decided to tweet it to his twelve million followers, right? So he tweeted my phone, just erased everything I had on it and rebooted one of the sickest feelings I've ever had in my life.
Robin Host 24:21
So you can imagine, yeah.
Shelley Co-Host 24:23
You can imagine how that turned out for Samsung stealing away Apple's market share. Probably not so well, that's right.
Robin Host 24:30
But the key takeaways.
Shelley Co-Host 24:31
I think you know. You have to really understand the sign of the times, know your audience, your target market and when it's not right you got to pull the plug. The long term effects are not worth it and don't rely heavily, or too heavily, on one end of the day. Endure, sir.
Robin Host 24:48
Oh well, unless you're Michael Jordan, Right, Of course, but your points shall be your spot on, obviously. I mean these celebrities celebrity influencers are humans and therefore have flaws. Companies need to understand how to best use human capital, if you will, to help foster brand loyalty and community, and when things go wrong, it's better to stand up and stop it. I mean, get out as quick as you can, allowing anyone you know celebrity influencer, CEO, any employee that acts in a way that creates a toxic environment should not be tolerated. I mean creating processes and procedures around handling someone that creates this type of environment, like Adidas and Yeezy, for so long. I mean it's just crazy.
Shelley Co-Host 25:54
Yeah, I agree, Robin. It really makes me question the leadership at Adidas, for sure, and when I reflect back on these pivotal moments regarding these types of endorsements, I think the ones that are kind of case studies to be understood or studied are Tiger Woods, bud Light and Adidas Yee. I mean Adidas Yee goes down as the one of the biggest you know learnings that we should really understand what happened there and prevent it from moving forward, preventing, you know, relations, collaborations like that to move forward. But you know, all these are for different reasons these examples, but nonetheless they are important for us. Our audience knows this.
26:33
But finding the right celebrities who represent your brand that aligns with your value, your unique value proposition, and making sure they actually use, love, the product, I think those are all key and then and then you just got to hope they don't do something stupid that goes against the brand. I will end my part of the podcast with some research by Gianna Eckhardt and Susan Fornier she's the Dean at Boston University Questrum School of Business and they had an article published by AMA American Marketing Association called Managing the Risk of Human Brands. In the article it talks about human brands are risk laden because people present increased chances for undesirable events such as illness or misconduct, and these reputational changes challenges can diminish returns.
Robin Host 27:25
Well, you know, Shelley. To wrap it up, I guess endorsements are not new right. Even the gladiators in Rome were commissioned to endorse brands of olive oil.
Shelley Co-Host 27:40
So funny. Yeah, it's crazy.
Robin Host 27:42
But? But they have certainly changed with technology, social media, and consumer empowerment. So, Shelley, I think our message to our listeners is that companies increasingly turn to deals with celebrities. The easy collaboration shows the precarious balance of risk and reward. Adidas entered the partnership with West in hopes of catching up to Nike, which had long dominated the hyper-competitive global sneaker market. But working with Mr West, one of the most influential artists in the world a master of spectacle, as some people called him, should have been seen for what it, what it was and what he is. While some other brands have been quick to end deals over offensive and embarrassing behavior, Adidas held on for years Incredible, incredible story Unbelievable, yeah, yeah For our listeners.
Shelley Co-Host 28:46
You can find more of our podcast on Apple, Spotify, bose, sprout, and therobinreport.com. Please make sure you follow us on social media. Link in with us for the latest thoughts about the industry.
Robin Host 28:59
And I like to thank all of you again and, as I mentioned every week, if you have a topic that you would like Shelley and I to cover, please send me an email To Robin at therobinreport.com, and thanks again.