The Negotiation Between Nike & Kanye West That Cost Nike Billions
In 2016, Kanye West asked Facebook CEO Mark Zuckerberg to invest in his ideas as he was personally $53 million dollars in debt. How did Kanye go from “broke” to billionaire? The answer is simple, his footwear and apparel company, Yeezy.
The process West took to become a billionaire isn’t an easy one.
In 2013, Kanye had already established himself as a bonafide global superstar. He’s produced 7 albums, completed 5 tours, won countless of awards, and become an icon in hip-hop culture.
On top of his success in music, he has built a 9-figure footwear and apparel brand in ‘Yeezy.’ The Yeezy brand has released a total of three sneakers in collaboration with Nike - two silhouettes, the Yeezy 1, and the Yeezy 2 - along with multiple colour variations of each.
As sales of the Yeezy collection at Nike began to explode, Kanye felt under-appreciated and approached Nike management with an idea.
Kanye approached Nike with the idea of having a royalty on all Yeezy shoes sold. As Kanye said himself “it was the first shoe to have the same level of impact as an Air Jordan, and I wanted to do more,” West told Forbes in 2019. “And at that time Nike refused to give celebrities royalties on their shoes.”
Nike rebuffed against the idea pointing to the fact that Michael Jordan was the only athlete getting a royalty. Nike’s offer was to put a small percentage towards a charity of his choice. Kanye declined.
As the negotiations between Kanye and Nike dragged out publicly, Adidas decided to get in the mix and invited Kanye and his representatives to its headquarters in Germany.
Fearful that Nike would be able to sneak back in, Adidas made a historic offer.
The offer allowed Kanye to keep 100% ownership in Yeezy - making Adidas the exclusive producer, marketer, and distributor of all Yeezy shoes. Kanye would also be given a 15% royalty on all wholesale plus a yearly marketing fee. Considering Michael Jordan is rumoured to get closer to a 5% royalty fee, the offer was unprecedented. Kanye accepted the offer and became an Adidas partner.
In the years since, the Yeezy & Adidas partnership has flourished. The official debut was in February 2015 and was pushed out by celebrities like Diddy, Kim Kardashian, Rihanna to their hundreds of million of social media followers. The collaboration recently reported $1.5 billion in sales during 2019, a 50% increase over the previous year. To put this into context, the Jordan brand does a reported $3 billion in annual sales for Nike.
Takeaway: Kanye bet on himself - leaving a $170 billion global brand for the unknown, getting a sweetheart deal, and maintaining 100% ownership of his company. It’s not everyday you see that, then again, Kanye is the perfect example of Aristotle’s famous quote - “no great mind has ever existed without a touch of madness.”