On the off chance you missed it, Kanye West,
who adorns his two-year-old daughter in pastel furs and has boasted in rhyme
about running suicide drills on private planes, sent the social-media
industrial complex into overdrive this weekend when he bashfully announced on
Twitter that he was $53 million in personal debt. The impecuniousness, he
noted, was the result of following his dreams in the fashion industry.
I write
this to you my brothers while still 53 million dollars in personal debt...
Please pray we overcome... This is my true heart...
- Retweets 16 342
- J'aime 35 854
19:46 - 13 févr. 2016
I don’t have enough
resources to create what I really can…
- Retweets 10 016
- J'aime 22 199
Yes I am personally rich
and I can buy furs and houses for my family
- Retweets 17 876
- J'aime 30 887
but I need access to
more money in order to bring more beautiful ideas to the world.
- Retweets 15 520
- J'aime 27 548
If I spent my money on
my ideas I could not afford to take care of my family. I am in a place that so
many artist end up.
- Retweets 8 409
- J'aime 21 234
For the
past 3 years people who knew about the debt tried to use it against me in
negotiations …
- Retweets 5 563
- J'aime 17 771
00:57 - 16 févr. 2016
I wanted the world to
know my struggle…
- Retweets 7 470
- J'aime 18 285
I wanted
the world to know my struggle…
- Retweets 7 470
- J'aime 18 285
00:58 - 16 févr. 2016
my dreams
brought me into debt and I’m close to seeing the light of day…
- Retweets 6 850
- J'aime 19 335
01:00 - 16 févr. 2016
While commentators were perplexed by his lack of
frugality, or surprising surplus of modesty, the over-leveraged rap icon’s
state of affairs is a reflection of the brutally difficult fashion business—an
industry that requires significant upfront costs and can promise little in
return. Despite a growing popular appreciation of his designs, West has learned
the realities of the industry the hard way. In 2009, he put all of his musical
endeavors aside to work on his label, Pastelle—which then shuttered
after seven months. Add to that however much it cost to create his line of G.O.O.D.
merchandise, marketed to fans of his record label. He was chewed up and
spit out for his attempt at a high-end women’s-wear line called Kanye West
in 2011. The line never made it to stores. According to a 2013
interview with Jean Touitou, the founder of the French line A.P.C.,
which created capsule collections with West, the experiment put the rapper out
$30 million.
His collaborations with Nike, on the wildly popular
Nike Air Yeezy sneakers, did not stem the losses. West has said he was not
given a percentage of the sales—a sticking point that eventually caused him to
defect for what would appear to be a more lucrative deal and more creative license
at Adidas, where he was able to expand into clothing and elaborate fashion
shows at sold-out
arenas three times in the span of one year. In his first “season,” West told BET he
went $16 million in debt getting his line off the ground.
Those numbers, while significant, are not surprising
to industry insiders tasked with coming up with business plans for people like
West, who have grand visions without the slightest idea of what they might cost
to execute. The expenses related to production, sales, buying, marketing and
setting up the infrastructure to manage the logistics of a fashion line are one
thing, according to Jonathan
Reed, C.E.O. of brand consultancy CS Global. But scaling the product
and setting up a show is what really drives up the capital requirement.
“For a large show, you’re thinking about venue
expenses, set and stage expenses, audio and special effects, labor costs, which
at a place like Madison Square Garden, which is union, is more expensive. This
can run into seven figures very quickly,” he said. “That doesn’t include any of
the talent—models, hair, makeup, stylists. That’s its own huge bucket, another
easy seven figures.” The cost of recording the spectacle, which often requires
multiple crews shooting front-of-house and backstage at the same time, plus
back-end production, only adds to the cost. “As a general statement, it would
be very easy to amass large amounts of debt in the costs of producing a
collection, putting it together, showing a collection, and then selling a
collection,” Reed said.
The fashion business is famously treacherous for
novices. As Natalie
Portman may have learned with her ill-fated 2008 footwear line, the
sourcing is expensive, as is labor and marketing. It’s hard to get good
counsel, especially for celebrities. “Musicians get terrible advice. They
surround themselves with people who are fans or wannabe musicians who couldn’t
make it on the stage so they became accountants or attorneys,” said Jane King, a money manager at
Fairfield Financial Advisors, who works with clients in the
entertainment industry. “It’s an ego tip, because artists have plenty of money
to get into other businesses. But has anyone done a five-year projection of
what the bottom line will be? I doubt it.”
But with West, however, one suspects this isn’t the
case. On one level, his exorbitant debt does not appear cause for real
financial concern. Instead of financing his creative
side projects through his main money-making artery—each concert on his
2013-2014 Yeezus tour reportedly grossed $1 million, according to Forbes, which, along with a spate of
successful albums, helped him bring in a total of $72 million pre-tax over the last three years—West
is presumably seeking funding through bank loans or venture partners. Most
of the world’s sophisticated investors separate their personal assets and
savings from their venture funds. This, in some ways, explains how Donald Trump could
file for bankruptcy multiple times and remain a billionaire. And it also
suggests how Silicon Valley venture capitalists could elevate—and, in some
cases, inflate—the value of various tech companies while carrying little of the
personal risk themselves.
In some regard, West’s tweets may simply have been an
elaborate and modern version of a pitch deck in search of that true marker of
early-21st-century creative genius: Series A funding. Indeed, he publicly
solicited the help of Mark Zuckerberg, whom he asked for $1 billion to
keep making art. He also said he would be willing to accept money from Google’s
Larry Page. Any other hedge funder or bigwig with pennies to spare would
do, too. These guys, after all, know that $53 million is a small price tag for
a moon shot.
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