NEW YORK (AP) — Adidas ended a partnership that helped make the artist formerly known as Kanye West a billionaire and lent the German sportswear an edgy appeal, but ultimately couldn’t survive a mounting outcry over the rapper’s offensive and antisimetic remarks.
The split will leave Adidas searching for another transcendent celebrity to help it compete with ever-larger rival Nike, but will likely prove even costlier for Ye, as the rapper is now known. The sneaker giant became the latest company to cut ties with Ye, whose music career has been in decline as he courted controversy.
Adidas said it expected to take a hit of up to 250 million euros ($246 million) to its net income this year from the decision to immediately stop production of its line of Yeezy products and stop payments to Ye and his companies. Its shares were down 3% on Tuesday.
“Adidas does not tolerate antisemitism and any other sort of hate speech,” the company said in a statement Tuesday. “Ye’s recent comments and actions have been unacceptable, hateful and dangerous, and they violate the company’s values of diversity and inclusion, mutual respect and fairness.”
For weeks, Ye has made antisemitic comments in interviews and social media, including a Twitter post earlier this month that he would soon go “death con 3 on JEWISH PEOPLE,” an apparent reference to the U.S. defense readiness condition scale known as DEFCON. He was suspended from both Twitter and Instagram.
Adidas has stuck with Ye through other controversies over his remarks about slavery and COVID-19 vaccines. But Ye’s antisemetic comments stirred up the company’s own past ties with the Nazi regime that the company had worked to leave behind.
The World Jewish Congress noted that during World War II, Adidas factories “produced supplies and weapons for the Nazi regime, using slave labor.”
Jewish groups said the decision to drop Ye was overdue.
“I would have liked a clear stance earlier from a German company that also was entangled with the Nazi regime,” Josef Schuster, president of the Central Council of Jews in Germany, the main Jewish group in the country where Adidas is headquartered.
Adidas, whose CEO Kasper Rorsted is stepping down next year, said it reached its decision after conducting a “thorough review” of its partnership with Ye, whose talent agency, CAA, as well as Balenciaga fashion house had already dropped the rapper.
Despite the growing controversy, Allen Adamson, co-founder of marketing consultancy Metaforce, believes that Adidas’ delayed response was “understandable.”
“It’s a hugely profitable, edgy brand association,” Adamson said. “The positives are so substantial in terms of the audience it appeals to — younger, urban, trendsetters, the size of the business. I’m sure they were hoping against hope that he would apologize and try to make this right.”
Ye express some regret in an interview with podcaster Lex Fridman posted online Monday, in which he characterized his initial tweet as a mistake and apologized to “the Jewish community.”
But Adamson noted that Adidas was facing pressure from everywhere including customers, employees and stakeholders.
Adidas doesn’t break out Yeezy sales numbers, but the impact will be more severe than expected given that the brand has ended production of all Yeezy products and ceased royalty payments, according to Morningstar analyst David Swartz in a note published Tuesday.
Swartz projects overall Adidas revenues to reach $23.2 billion euros ($23.1 billion) this year, with the Yeezy brand generating 1.5 billion to 2 billion euros ($1.99 billion), or nearly 10% of the total. The pricy brand accounts for up to 15% of the company’s net income, Swartz said.
In the hours before the announcement, some Adidas employees in the U.S. had spoken out on social media about the company’s inaction.
Sarah Camhi, a director of trade marketing at the company who described herself as Jewish, said in a LinkedIn post that she felt “anything but included” as Adidas “remained quiet; both internally to employees as well as externally to our customers.”
Forbes estimated that Adidas accounted for $1.5 billion of Ye’s net worth and without the deal, it will fall to $400 million, including his music catalog, real estate, cash and a stake in ex-wife Kim Kardashian’s shapewear company Skims. Forbes said it will no longer include Ye on its list of billionaires, though the rapper has long insisted the magazine underestimates his wealth.
Ye has alienated even ardent fans in recent years, teasing and long tinkering with albums that haven’t been met with the critical or commercial success of his earlier recordings. Those close to him, like Kardashian and her family, have ceased publicly defending him after the couple’s bitter divorce and his unsettling posts about her recent relationship with comedian Pete Davidson.
Ye has told Bloomberg that he plans to cut ties with his corporate suppliers. After he was suspended from Twitter and Facebook, Ye offered to buy conservative social network Parler.
An email message sent to a representative for Ye was not immediately returned.
The rapper, who has won 24 Grammy Awards, has been steadily losing audience on the radio and even his streaming numbers have declined slightly over the last month. According to data provided by Luminate, an entertainment data and insights company whose data powers the Billboard music charts, his airplay audience has slipped from 8 million in the week ending Sept. 22, to 5.4 million in the week ending on Oct. 20. The popularity of his songs on streaming on demand also went down in the same period, from 97 million to 88.2 million, about a 9% drop.
Universal Music Group, which owns the Def Jam label, said Tuesday in a statement that Ye’s music and merchandise contracts ended last year.
Ye has earned more of a reputation for stirring up controversy since 2016, when he was hospitalized in Los Angeles because of what his team called stress and exhaustion. It was later revealed that he had been diagnosed with bipolar disorder.
He has suggested slavery was a choice and called the COVID-19 vaccine the “mark of the beast,” among other comments. He also was criticized earlier this month during Paris Fashion Week for wearing a “White Lives Matter” T-shirt to the show and put models in the same design.
MRC studio announced Monday that it is shelving a complete documentary about the rapper. JPMorganChase and Ye have ended their business relationship, although the banking breakup was in the works even before Ye’s antisemitic comments.
Gap said Tuesday that it will remove Yeezy Gap product from its stores and has shut down yeezygap.com. The clothing retailer had said in September it was ending their relationship but initially planned to continue to sell Yeezy Gap products that were in the pipeline.
Jewish groups have pointed to the danger of the rapper’s comments at a time of rising antisemitism. Such incidents in the U.S. reached an all-time high last year, the Anti-Defamation League said in a letter to Adidas last week urging it to break with Ye.
Jonathan Greenblatt, CEO of the Anti-Defamation League, applauded the company’s decision to drop Ye.
“This is a very positive outcome,” he said in a statement Tuesday. “It illustrates that antisemitism is unacceptable and creates consequences.”
The saga of Ye, not just with Adidas but with brands like Gap and Balenciaga, underscores the importance of vetting celebrities thoroughly and avoiding those who are “overly controversial or unstable,” said Neil Saunders, managing director of GlobalData Retail.
“Companies or brands that fail to heed this will get stung, especially if they become overly reliant on a difficult personality to drive their business,” Saunders said.