the good, bad, and the ugly

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Hey! Thanks to everyone who has sent us questions for our mailbag episode of the show. If you haven’t already, it’s not too late! Go to memo.fm/trapital, and leave us a message with your questions about the business of music and entertainment.

Today’s memo and episode are about the rise and fall of Yeezy. I’m joined by friend of the pod, Zack O’Malley Greenburg. You can listen here or read below for a few highlights.

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why the Nike era didn’t last

Kanye West introduced the world to the Nike Air Yeezy I at the 2008 Grammy Awards. That was its “soft launch” ahead of the sneaker’s official 2009 release. After several years of talks with both Nike and Adidas, Ye’s fashion dreams had come to life.

But to put it lightly, Kanye and Nike were on slightly different pages. Kanye was fresh off the biggest album of his career in Graduation. Stadium Ye was in world-building mode. Meanwhile, Nike reportedly offered Yeezy Inc. no royalties on sales and wanted Ye to donate a portion of the proceeds to charity. On a scale of one to ten, if Nike’s Jordan Brand was a ten, then Nike Air Yeezy was a 2.5 at best.

Kanye wanted to democratize access. He wanted Nike to mass-produce Yeezys so they were as widely available as LeBron’s sneakers. But Nike wasn’t willing to offer all that. Plus, despite Ye’s wishes, he did not have a direct line to Nike CEO Mark Parker. Despite the cult following on Nike Air Yeezys like the Red Octobers, the shoe line felt like more of a vanity project.

By the early 2010s, Nike had grown frustrated and felt that Kanye was difficult to work with. This was around the time of Kanye’s unforgettable rant on Sway’s Universe.

Ye told Sway about his attempts in clothing “It ain’t no Ralph though.” Nike Air Yeezy wasn’t Ralph either, but Adidas Yeezy got a lot closer.

adidas and the accessibility-exclusivity tradeoff

Despite Nike’s reported warnings to its biggest competitor, Adidas partnered with Yeezy and gave the Yeezus artist exactly what he wanted:

• a rumored $10 million upfront deal
• a royalty rate 3x as high as Nike’s with Jordan Brand
• a direct line to adidas’ then-CEO Herbert Hainer

adidas was in an underdog position relative to Nike and was willing to give Ye better economics than the industry leader.

But there was still tension regarding the release strategy. Kanye wanted to make these shoes accessible as soon as possible. Meanwhile, adidas—wisely—took it slow to test it out and build demand over time so it doesn’t oversaturate the market.

By 2016, Yeezy Season Fashion Shows were in full effect, and the demand for adidas Yeezy sneakers was sky-high, but the limited quantities made it tough to cash in. Meanwhile, Ye was tweeting up a storm about how he was $53 million in debt and asked several tech luminaries to fund his dreams. This was his Hail Mary pass to Mark Zuckerberg to see if he would be the Medici Family!

By 2019 though, adidas ramped up its supply, cashed in on hype culture and streetwear. Forbes highlighted the billion-dollar business.

At its peak, adidas Yeezy was the greatest sneaker-celebrity collaboration outside of Jordan Brand. Kanye West reached heights that most NBA players never reached, let alone an artist. But at its decline, adidas Yeezy was a sad tale of what might have been.

a Gap in value

In June 2021, Kanye West and Gap signed a ten-year deal that Bloomberg valued at $3.2 to $4.7 billion. After year five, Gap projected that Yeezy Gap sales would reach $1 billion in sales, which was 22% of Gap Inc’s global sales in 2022!

Yeezy Gap looked great on paper. Marketers compared it to Martha Stewart’s multi-billion dollar deal with KMart. But in reflection, Yeezy Gap was yet another zero interest rate phenomenon.

Kanye wanted his hoodies to be accessible and sit on shelves “like a loaf of bread.” Gap was willing to accommodate, but the approach still seemed like a disconnect between Gap’s vision, Ye’s vision, and the overall product.

But the sales struggles barely had time to play themself out. By the fall of 2022, Kanye West’s business partners had terminated both of his contracts after various accounts of anti-Semitic hate speech. Adidas reportedly knew about these issues but tried to address them internally until it reached the public.

Now, Yeezy is off on his own. Despite his new album with Ty DollaSign, or his direct-to-consumer product releases on yeezy.com, it will be tough to match the same level of input.

Listen to the rest of the episode for more on:

• Kanye’s anti-Semitic downfall
• how YZY SZN helped Kanye promote music and clothing
• why the rise and fall of Yeezy remind us of the movie TAR

Chartmetric stat of the week

We've talked a lot about Kanye West's brand partnerships in this episode. Chartmetric measures each artist's Audience Brand Affinity: how much an artist's followers on Instagram overlap with a particular brand.

​As of February 7, Louis Vuitton is #10 on the "Louis Vuitton Don's" list. Adidas, the former home to Yeezy is #3. Nike, the original home to Yeezy is #2. And number 1 is… Supreme! If Yeezy needs a future partner, that may be his best bet.

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money moves

• the rise of Las Vegas concert residencies​
• Toby Keith’s business legacy​
• ​Jimmy Buffett: a must-listen Founders Podcast for anyone in music
• a nice breakdown from Chenell Basilio on how I run Trapital (thank you!)
• send a voice message to Trapital with your questions for our next mailbag episode!

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