Why Kanye West Is Bound to Keep Fighting for Ownership - Part 2

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Why Kanye West is bound to keep fighting for ownership - part 2

Three and a half years ago, I wrote an essay called Kanye West is Bound to Keep Fighting for Ownership, which was about his desire to exit his record label deal. This was the last line of that essay:

“But it feels like the Louis Vuitton Don will be in a similar situation sooner rather than later.”

Now, here we are again.

For most of his career, Kanye West was striving to make it. He wanted the legitimacy, the respect, and the admiration. But to reach the heights he has both in music and fashion, Ye gave up ownership and control to get a boost from established companies.

He now wants to end his partnerships with both Adidas and Gap so he can build on his own table. Ye told Good Morning America that “Sway had the answer” all along. It was a great viral soundbite to make his intentions clear, but the business of Kanye West may soon feel the inner tension of that statement.

The ownership life ain’t for everyone. It’s a tradeoff, even for a 45-year-old billionaire who is one of the most popular artists in the world. Ye likely has dreams of building Yeezy into its own Adidas, but that’s a lot harder than it seems.

The independent Yeezy life

Yeezy Adidas is still a booming business. According to The Washington Post, Yeezy generates €‎1 - €‎1.5 billion in annual sales for Adidas. And since Ye gets a rumored 11% royalty on each shoe sold, he takes home over €‎100 million per year from the partnership.

But without Adidas, can Ye match that take-home pay on his own?

Let’s assume the average Yeezy price is €‎300. That’s around 4.2 million pairs sold per year. So if Ye wants to match that €‎100 million revenue with a 100% royalty on his own shoe, then he would need to sell over 450,000 pairs on his own each year.

That may sound doable, but that’s more than ten times the self-reported number of Stem Players that Ye sold independently! Sure, Yeezy customers may be a slightly different profile than Donda 2 album listeners, but both audiences are reached through the same channels—Ye’s social media accounts, his interview platforms, and gossip sites. Kanye never built a strong distribution list that doesn’t rely on algorithms or other partners. He can’t reach his audience without them. Instead, he relies on head-scratching, disappointing, TMZ-worthy actions to capture attention.

This will be Ye’s biggest challenge when he builds Yeezy on his own. Companies like Adidas, Def Jam, and Live Nation helped maximize his popularity. But the downside is that when he wants to go independent, it’s hard to reach those same people without additional support.

Breaking through to Ye

The irony for Ye is that he’s one of the few artists who make people feel. Last year’s Donda listening sessions sold out football stadiums across the US. But again, that was in partnership with Live Nation, a company that already had the infrastructure to make that happen.

In a perfect world, Kanye could still find a healthy compromise with Adidas and move forward. But it’s not just on Kanye, it’s on Adidas too. Yeezy accounts for roughly 4 - 8% of all Adidas revenue. But if you also count the sales of Adidas lines that are clearly inspired by Yeezy (which Ye doesn’t get a cut of), and sold in even larger quantities, his influence on the €‎23 billion company is even greater. If I was Ye, I would push for a board seat too.

His influence is strong, and he can’t capture it all on his own given the limited ownership-inspired career moves up to this point.

There’s an alternate scenario where Yeezy-Adidas could get their issues worked out and be even bigger than Jordan Brand. There’s also an alternate scenario where Yeezy-Gap can realize its overly-generous valuation it received just last summer. More artists, athletes, and entertainers could have their own lines under Yeezy. Remember when Von Miller wore Yeezys in an NFL game? There should be collaborations like that.

But now, it may be a little bit tougher. Major partners may shy away from Kanye given the public disputes with Adidas and Gap. And now that Kanye has said, “I’m not going to argue about people broker than me about money,” it’s harder and harder for anyone to break through to the Louis Vuitton Don.