How Production Companies Are Taking a Bite Out of Agency Business

It's no secret that holding companies have their backs up against the wall as MDC Partners is up for sale and WPP is mashing agencies together left and right in order to survive and hopefully flourish again. There are a number of reasons behind their struggles, but according to Pivotal Research senior analyst Brian Wieser, the "single most important factor" contributing to the holding companies' declining revenues might be from brands cutting costs on creative, often working directly with production partners. Brands want content delivered more efficiently and are moving toward more project-based work. That demand is driving new models that bring production and creative services together. Plus, the limitations of the traditional agency model leave creatives and strategists longing for a new approach. The result is a growing number of production companies that have shifted their focus to provide expanded services to clients, often at more attractive terms. As clients search for efficiency, they "are calling up production companies and saying, 'Hey, can we just cut out the agency and just do that with you?'" explained Serge Patzak, co-founder of SpecialGuest, who launched that agency along with fellow partners in the production company 1stAveMachine approximately 5 years ago in response to such queries. The agency relaunched with a new roster of creative directors early this year. Clients' in-house teams are facilitating and fueling the trend, as they're built with former agency people who know they can capitalize on the shortcomings of traditional shops. "A lot of agency talent has left to work at brands and because of that [those companies] feel more comfortable working with production companies since they understand the language," said Wesley ter Haar, COO of creative digital production company MediaMonks and S4 Capital executive director. MediaMonks, which defines itself as "consolidating creative, data, media and technology," made industry headlines last year when it was acquired by Martin Sorrell’s S4 Capital, something ter Haar said was a "reflection of the changing role of production within the advertising landscape." Sorrell subsequently revealed S4's plan to cut out creative agencies. Sometime around 2017, several brands told creative production company Tool of North America that they couldn't hire enough creatives and strategists to keep up with the pace of briefs and opportunities, expressing a need for partners who could work collaboratively on-site, managing partner Dustin Callif explained. Creatives and strategists have been receptive to its model, Tool owner Erich Joiner said, citing how at traditional agencies, creatives feel that "they’re just putting out fires and not making stuff anymore." He added that Tool's talent can work on projects that make sense for them, which he said his clients appreciate because they "only want people who are going to be super passionate." The desire to balance efficiently meeting clients' needs while also making great creative led SpecialGuest to emerge out of production company 1stAveMachine as a separate company. Initially, founder Aaron Duffy provided creative services to clients, coupled with expertise about the production process, but the agency recently expanded the approach across a roster of creative directors. Unlike Tool, SpecialGuest does not follow a hybrid creative-production model and instead functions as a separate entity from 1stAveMachine—albeit one with close ties to the production company. Clients appreciate how the model allows for close collaboration with in-house teams. "I work so closely with Aaron, it isn't like an agency, really. It is more like a partner. He feels like an in-house collaborator," Rag & Bone vp, creative Marissa Kraxberger said. "There is a reason why they are the only agency we work with: The model is simply better." The model isn't for everyone, of course. It lacks the type of scale or account service offerings of traditional agencies, plus not all creatives would feel at home with the approach, something Duffy admits. "We’re solving something for a certain type of creative person," he said. Working with a creative roster is something that has implications for how more traditional agencies, many of which increasingly rely on freelancers, could work in the future. "Don’t be surprised if there are actually ad agencies that start applying this model," Callif said, as they attempt to retain top talent while evolving their model to a more project-based approach that doesn't allow for as many salaried creatives. To achieve that, Callif said one possible solution is backing those high-level creative directors and strategists with a flexible production team. Duffy agreed that more traditional agencies could adopt a creative roster model, saying, "In some ways, I think there’s an inevitability there." Agencies have already responded to industry changes by expanding production services, a trend that could accelerate with the recent Department of Justice finding clearing all five holding companies of "bid rigging" allegations. As the lines blur, agencies and production companies alike seem to be rushing to create a new, evolved model for partnering with clients, ter Haar said. "Most of 'us' are moving towards a very busy center," he said. "It’s about a hands-on model, with minimal overhead, no silos and as little distance between idea, execution and performance as possible."

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How Production Companies Are Taking a Bite Out of Agency Business

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Erik Oster

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Erik Oster