I know plenty of agencies who have either switched to products or just sold up / closed.
Using associates is a good option if you have a good network, however, it can be just as stressful if they don’t deliver.
This is always a temptation for agencies which almost never works out. They underestimate the effort to build a product. They also typically don't have the skill or experience to build a high quality product that can compete with the whole world.
I don't think they underestimate the effort or lack the skills; the issue is trying to do both - grow the agency and launch a product.
The ones which made it either split the agency or stopped doing client work.
An associate model is great, allows everyone flexibility and participate in killing what they eat along and together