Adidas ditches Ye, but not all its problems

Happy Halloween weekend! We kick off this edition of Scoreboard with an extremely niche but spooky fun fact: not one but two senior figure skating pairs teams are performing programmes this season to remixes of “In The End” by Linkin Park (feel old yet?), per results of Skate America last week.

In the realm of the business of sport, however, we’ve had quite a few shockers. For one, a nearly decade-long tie-up between Adidas and Ye, the rapper and designer formerly known as Kanye West, came to an ignominious end on Tuesday amid the artist’s recent hateful tirades. We dive into that in our first item, but in more Scoreboard-specific developments we were so thrilled to host our second annual FT Business of Sport US Summit on Monday, where some of the top dealmakers, franchise owners, and change agents in the industry gathered for an afternoon of stimulating conversation and debate. Thanks to all the speakers, sponsors, and attendees for making it possible, and we’ve digested all the top takeaways further below. Do read on — Sara Germano, US sports business correspondent

Adidas has 99 problems and Yeezy was but 1

One of the biggest global business stories this week was the decision by Adidas to drop its affiliation with the rapper and designer Kanye West after his recent spew of anti-Semitic remarks, ending a professional relationship and collaboration that lasted more than eight years.

First things first: hate speech of any type is abhorrent, and West’s rhetoric against Jews deserves neither indulgence nor more oxygen in public discourse. The dignity of any group of humans is more important than the interests of a company.

Which is precisely the predicament in which Adidas found itself in in recent days, dragging its feet on a “review” of its relationship with West, who now goes simply by Ye, it instituted on 6 October.

Ye’s recent screed began on that day with an initial interview with Fox’s Tucker Carlson, and continued with a series of posts on social media. Other brands and agencies, including Balenciaga, Gap, and CAA, moved to end ties with him more swiftly.

For Adidas, the second-largest athletic brand globally by sales, cutting Ye meant cutting a significant driver of business: analysts estimate his Yeezy sportswear line accounts for about 8 per cent of annual revenues.

Ye’s impact at the German company can hardly be overstated. In 2015, after years of declining sales in the US market — the lion’s share of the sporting goods industry at the time — Adidas said it wouldn’t renew its outfitting contract with the National Basketball Association, the ultimate symbol of how far its brand had faltered. That same year, the first Yeezy shoe was released under the three stripes, giving Adidas an instant credibility boost with tastemakers and making the brand relevant again in America.

In its second quarter 2016 earnings report, Adidas called their collaboration “the most significant partnership ever created between a non-athlete and an athletic brand”.

Fast forward to today. More than two years into the global reset brought by the pandemic, Adidas has issued two profit warnings in less than three months — most recently eight days ago — due to piles of excess inventory amid slower demand. The company previously announced it is searching for a successor to chief executive Kasper Rørsted, who is expected to depart next year, three years earlier than his existing contract.

Can Adidas’ initial shortsightedness on Ye — it was berated by the Central Council of Jews in Germany and the Anti-Defamation League — be attributed to financial difficulties or a power vacuum? It’s hard to say definitively. But Adidas has had other stumbles on social issues in recent years: during the reckoning on race in the US after the murder of George Floyd in 2020, the company initially opted to retweet a statement by rival Nike before deciding to speak out on racism in its own voice.

The departure of Rørsted, meanwhile, is the second such transition of a non “shoe dog”, or industry veteran, after a short tenure leading sports brands. Rørsted, who worked at Henkel, Hewlett-Packard, and Oracle before joining Adidas, follows former Aldo and North Face executive Patrik Frisk who left his post as chief executive of Under Armour in June.

The Ye controversy is unquestionably problematic for Adidas. With shares down 66 per cent so far this year, it’s also not the least of the company’s troubles.

Talking points: FT Business of Sport US Summit

Once ignored, women’s sport is the centre of attention

Fenway Sports, the owner of Liverpool FC and the Boston Red Sox baseball team, is looking to invest in a women’s sports team in the next six to 12 months, Samantha Barkowski, vice-president of strategy and growth at FSG, told the FT.

“In terms of what we look for . . . if and when we look to acquire a women’s professional sports team; deeply passionate fan base, strong opportunity for revenue generation, sustainable business practice, which we’re seeing more and more in professional women’s sports, ” she said.

Rich Kleiman, who co-founded Thirty Five Ventures with basketball star Kevin Durant, said that, “sadly”, women’s sports remains the most undervalued segment of the industry. But once the Brooklyn Nets star finishes playing, Kleiman says he’d jump at the chance to buy into a Women’s National Basketball Association team.

“The case study is there when you look at women’s sports and there’s got to be a commitment now to looking at the model differently — stop trying to create women’s NBA but to create a league that flourishes — and to commit to it and be consistent with it because it takes time.”

Marc Lasry: a billionaire who’s not just about the returns

One theme we’re accustomed to here at Scoreboard is the quenchless thirst of American billionaires to buy Europe’s top football clubs. Deep-pocketed investors lined up to buy Chelsea FC but lost out to Todd Boehly and Clearlake Capital. Gerry Cardinale got his hands on AC Milan. The list goes on.

So is Marc Lasry, co-owner of the Milwaukee Bucks basketball team and co-founder of $12bn investment firm Avenue Capital Group, keeping his eye on any football clubs? How about Italy’s Inter Milan? Or Germany’s Hertha Berlin?

“Not at all,” he told Scoreboard’s own Sara Germano. “For me, part of the joy of owning a team is actually going to a game, and I’m not flying out seven hours to Europe to go watch a soccer game.”

And that comes back to one of sport’s big questions: trophy asset or business? In a sense, Lasry’s comments are sort of reassuring: it’s not all about the money.

“If you’re gonna spend that amount of money, it’s gotta be a passion,” Lasry said. “I wanna do things that I’m passionate about — that I like.”

Can Formula 1 achieve Premier League riches in the US?

Formula 1, the global car racing series controlled by Liberty Media, has long struggled to crack the US.

That was until the pandemic struck, nobody knew what to watch, and we all tuned into Drive to Survive, Netflix’s fly-on-the-wall documentary on the sport. No longer hidden behind their helmets, the drivers shone through like never before.

F1 now races in Miami. More than 440,000 people showed up at the US grand prix in Austin, Texas last weekend, the highest turnout at an F1 race this season. The inaugural Las Vegas event is set for next year.

But it wasn’t always so easy. Burke Magnus, president of programming and original content at Disney’s ESPN, recalled the early days of the broadcaster’s relationship with F1.

“It was so big globally yet so obscure in the US market we knew there had to be an opportunity there,” he said.

From screening races in the US for pennies to renewing the rights for around $85mn a year, Magnus says the sport is “red hot right now”.

But the sport has a long way to go to cut through like English football. The Premier League scored around $450mn a year when it renewed its US broadcast rights with Comcast’s NBC, as TV companies scrap for the rights to showcase elite live sport.

So what would help F1 catch up? “If ever a top-notch US driver gets involved at a team level that’s unrealised upside for them,” says Magnus.

Highlights

• Audi found its route into Formula 1 after agreeing to buy a stake in the group that owns the Sauber team, as the sport grows in the US and shows off its credentials as a marketing tool for high-end car brands.

• Dietrich Mateschitz died aged 78. The Austrian co-founded the Red Bull energy drinks business, built a $20bn fortune through punchy marketing, and acquired teams in F1 and football. He leaves a huge legacy in sport.

• English rugby union is facing an existential crisis. Two clubs have collapsed into administration, authorities are debating the future governance regime, and head injuries are casting a shadow over the sport.

• The easy investment gains in English football are already gone but the Premier League offers growth, barriers to entry, new business opportunities and the chance to buy a prime asset in a weakening currency, argue former investment banker Craig Coben and Millwall FC director Constantine Gonticas.

Transfer Market

• The National Basketball Association hired Tammy Henault as the league’s new marketing chief. She joins from Paramount Global, where she managed 150 people and led marketing efforts for its streaming platform. Henault will report directly to NBA Deputy Commissioner and Chief Operating Officer Mark Tatum.

• Robert Klein is leaving the Bundesliga, where he was head of international for the German football league, to join Endeavor‘s IMG Media as head of global football. 

Final Whistle

The Moneyball music hits different every time

(via @Phillies_Muse) pic.twitter.com/2mswv8QV6P

— Talkin’ Baseball (@TalkinBaseball_) October 24, 2022

Major League Baseball‘s World Series began last night with the first of seven games between the Houston Astros and the Philadelphia Phillies. Star hitter Bryce Harper sent the Phillies to their first championship series since 2009. His 13-year, $330mn contract, signed in 2019, was a then-record for most lucrative in baseball but it is proving to be worth every penny — a fact that is sent up in this Moneyball-scored highlight of his game-winning homer in the National League Championship series on Sunday.