The Hook

Adidas' Music Gamble: Why They're Betting on Pharrell Williams and Kanye West

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Pharrell Williams performs onstage during the Oscars at the Dolby Theatre on March 2, 2014 in Hollywood, California.

More than just a marketing coup, Kanye West's defection from Nike -- where he helped design the coveted Air Yeezy sneaker -- to Adidas in December signaled a redoubling of the 64-year-old publicly traded German brand's fashion-focused strategy for sneaker dominance. Although Adidas ranks as the world's No. 2 sports-apparel manufacturer, it has long played David to Nike's Goliath. In 2013, Forbes reported that 50-year-old, Oregon-based Nike, also publicly traded, owns 54 percent of the global market for athletic apparel, compared with Adidas' 4.4 percent. (Adidas' share of the athletic shoe market is 8.6 percent, but that's still about a sixth of its rival's.)

By luring West to its triple-striped Adidas Originals stable of creative collaborators with a reported $10 million deal, Adidas has effectively declared that it will march to its own funky drumbeat rather than follow Nike's playbook. If Nike relies primarily on performance and athletes' celebrity to sell sneakers, Adidas is counting on the cutting-edge cool factor found in music and fashion.

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"Creativity is my oxygen," said West during a talked-about speech at the Adidas Brand Global Conference in Bamberg, Germany, on April 7, where he announced the June release of his YEEZi sneakers (if Nike owns the Yeezy brand, then this is a clever fix). "I don't care how crazy I look to anyone, as long as I can make the best product for all of you," he said, calling his new sneaker patron "experienced and brave enough to give me an opportunity to create."

Since West signed with Adidas, the company has announced further music collaborations -- with fashion plates Pharrell Williams and Rita Ora -- that reinforce its fashion-over-­performance strategy, which began with designer Yohji Yamamoto's Y-3 label in 2003 and has since included Stella McCartney and Jeremy Scott -- partnerships that likely helped attract this musical talent.

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"Nike has always been on a consistent trajectory, which is why they don't want to make any change," explains Elliott Peter Curtis, founder of the Sneakerology course, the world's first accredited class dedicated to sneaker culture, at Carnegie Mellon University. "[Nike is] totally paranoid, and will come out with technology that outdoes their own. But Adidas can be more flexible; they've delved into a lot of other categories. The question is, will these collections translate to overall brand success?"

Although it's too early to tell what these partnerships will yield in the way of designs and profits, just hints dropped by these artists create frenzied interest. Even before Pharrell's and Ora's deals were announced, the artists were photographed wearing custom Adidas togs that generated robust social media exposure: There has been speculation that the three-stripe satin track jacket that Pharrell wore on "Saturday Night Live," or the Swarovski-jewel-encrusted shoes he wore on "The Ellen DeGeneres Show," or the magic marker-tagged Stan Smiths he posted on Instagram (and which Adidas included on a YouTube teaser video) will be part of his upcoming collection. And Ora had sneaker heads salivating when she posted a photo of her old-school white Adidas updated with copper-colored metal toes in January. After Pharrell performed in custom ruby-red high-top Adidas slippers at the Oscars, brand sales spiked at sneaker haven Sportie L.A. "Immediately we saw our customers gravitate even more toward Adidas," says store partner Isack Fadlon.

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Ironically, Nike may have been the one to verify that a strategy of linking sneakers to music stars works. West made quite a splash with the release of the Nike Air Yeezy shoe, which he developed with Nike creative director Mark Smith from 2007 to 2009. Consumer demand for West's designs reached a fever pitch with the release of a new Air Yeezy 2 model -- known by sneaker heads as Red Octobers due to its bright crimson color -- especially after Nike announced in February that it was canceling production of the style.

Three months earlier, West went public with his grievances, laying out his side of why the partnership went bust. During an appearance on WQHT New York, he explained: "Nike told me, 'We can't give you royalties because you're not a professional athlete.' I told them, 'I go to [Madison Square] Garden and play one-on-no-one. I'm a performance athlete.'?" Soon after, he upped the ego ante on SiriusXM hip-hop channel Shade 45: "I. Am. Warhol. I am the No. 1 most impactful artist of our generation, in the flesh. I am Shakespeare, Walt Disney. Nike. Google. Now who's going to be the Medici Family and stand up and let me create more?" (Nike wouldn't comment for this story.)

Adidas has already proved itself a haven for creative partnerships. Even before ­collaboration mania took hold of the fashion industry, Adidas was partnering with Run-D.M.C. in the '80s and Missy Elliott in the '90s. Its Yamamoto partnership marked the first time a high-fashion designer with couturier status worked with a sports company. Adidas has since commissioned collections -- with prices that range from $75 to $790 -- from designers Raf Simons, Rick Owens, Mark McNairy and, newly announced, Mary Katrantzou. Selena Gomez is now designing for Adidas' younger Neo label, and her on-again-off-again boyfriend Justin Bieber recently appeared as brand ambassador in Neo campaigns. "The majority of our collaborations, for example those with Raf Simons and Rick Owens, produce fascinating designs that marry fashion with cutting-edge technology," says Adidas Sport Style Division creative director Dirk Schonberger. "These are styles that really push the boundaries of product design." Adidas wouldn't comment on how much it is paying these artists. According to Max Nagler, head of the commercial endorsement department of the Gersh Agency, royalty agreements for these types of deals can range widely, from 3 to 20 percent.

As photos of Pharrell in his ruby high-tops are tweeted and posted on Pinterest, demand is created for upcoming collections even before the public knows what's in them. "The digital materials we develop around these projects allow consumers to engage and involve themselves in the process of hype and spreading the word around these collections," says Jon Wexler, Adidas' global director of entertainer and influencer marketing.

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Nike -- whose athletic endorsements include LeBron James, Kobe Bryant (once the face of Adidas), Kevin Durant and its longtime partner, basketball great Michael Jordan -- is not completely out of the music game. Drake, whose OVO brand includes mainly logo T-shirts and hats, recently signed with Nike under its Air Jordan subsidiary, and, in December, revealed an image of his OVO edition sneaker on Instagram. As Curtis notes, however, Drake's affiliation with Nike's OVO is merely an endorsement deal, not a creative collaboration. "His music makes headlines, but he is not a fashion icon," he says. "In fact, sometimes his fashion is mocked."

Which brings the story full circle. "Adidas gives complete freedom" to its collaborators, Schonberger says -- a philosophy under which West and Pharrell may likely flourish. The former considers creative autonomy his lifeblood, and the latter has been committed to innovative design for years. For instance, materials from the eco-textile company he co-founded, Bionic Yarn, will be incorporated into some of his collection. Says Schonberger: "I don't want to intervene or hinder the process at all. It would only make a collaboration weaker."