Popular direct-to-consumer brands like Bombas, Mailchimp, and SmileDirectClub are increasingly bypassing traditional agencies and working directly with production companies (SDC)

When Greg Beauchamp launched Bindery in 2012, it only worked with a handful of direct-to-consumer startups like Birchbox and Bonobos. Seven years later, the production company's revenue from DTC brands like Brooklinen, Etsy, Roman, Stitch Fix, and Verishop is up nearly 700%, Beauchamp said.

As DTC brands create branded content to scale their businesses, they are increasingly bypassing traditional agencies and going straight to production companies to try to cut costs, be more efficient, and maintain creative control.

"An advertising agency is like a black-box; when you hire one, you cede control over the process and don't have access," said Beauchamp. "We offer a more agile and streamlined process where they (clients) can be involved from the script to the screen. We're not like an assembly line that exists in traditional advertising."

Direct-to-consumer brands are using production companies as they make inroads into longer-form content

To be sure, marketers bypassing agencies to work directly with production companies is nothing new. But as DTC companies follow suit, they pose another threat to the already beleaguered traditional ad agency model.

DTC companies, already known to handle much of their operations themselves, are using production companies as they move into traditional marketing channels like TV and branded content. They say working directly with these companies lets them maintain creative control.

Take Mailchimp, which started 10-person Mailchimp Studios 18 months ago to produce its own podcasts, documentary films and episodic shows, but frequently hires companies like Scout Productions, as it did for its recent docuseries "Second Act," said Sarita Alami, Production Lead for Mailchimp Studios.

"We want to have an equal footing as a creative partner, stay close to the creative, and guide them through the process," she said. "It's just easier to do with production companies. Having an intermediary is a challenge no matter who they are."

Bruce Henderson, chief creative officer at SmileDirectClub, echoed that sentiment. The company has its own creative team but uses production companies like Improv Everywhere on a project basis.

"We're much closer to the business and the brand ourselves than traditional brands, as the closer we are to data, insights and feedback, the better and faster we are able to translate that into marketing and strategy," Henderson said. "Big, global agencies make sense for complex global brands with footprints in over 100 countries, but you need different types of solutions for different types of businesses."

DTC companies say they can save a lot of money by working directly with production companies. It could cost at least $300,000 to have an agency create a TV spot, website, digital cuts, and OOH assets, three times the cost of a production company, estimated Randy Goldberg, co-founder at sock company Bombas.

"We're not paying for agency overhead," he said.

Production companies are evolving to meet DTC needs

The rise of DTC companies has already spawned a roster of agencies that have positioned themselves around the needs of digitally native brands, and now production companies are expanding their services to cater to these marketers as well.

Two examples are New York-based shops Moving Image & Content and Quirk Creative, which began as production companies but have added agency-like services.

Moving Image & Content, which has clients including Birdies and Èsika, says it provides services like helping clients identify their audience and match their messages to the audience across marketing channels.

Quirk Creative, which works with companies like Keeps and Daily Harvest, claims to offer advantages over agencies, by creating TV campaigns faster and letting clients keep rights to the footage, which traditional agencies often retain, said CEO Meryl Draper.

"It's super appealing to a DTC brand that wants to cut, recut and optimize footage as much as possible," said Draper. "DTC brands demand that kind of flexibility with their video content."

But the competition is getting intense

Earlier, brands would typically appoint an agency, which would then outsource content to a production company. But with content channels proliferating, agencies, publishers' content studios, and new entrants like Accenture Interactive and MediaMonks are also getting into the content business, which means more competition for production companies.

"It's the Wild, Wild West, and it feels like we're in the middle of a shootout," said Joel Chiodi, SVP of strategic development at Scout Productions. "Everyone wants to be in the content business."

But as DTC companies grow, they'll require expertise that they can't get just from production companies, like strategy and media, said Kim Cortese, head of production at ad agency Huge.

"I don't see it as a threat, it's just a shift," she said. "When these companies need scale, broader expertise and best practices, they'll come after the agencies."

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