Amazon announced today (see Bloomberg and The Hollywood Reporter) that it’s laying off 110+ people from the Wondery team, and breaking up what’s left of Wondery into some smaller chunks.

Let me be clear: It’s been more than 2.5 years since I last worked at Wondery, so I have no inside scoop. So whether my inferences are right or wrong, let’s use today’s sad news about Wondery as a springboard to talk about two all-too-common mistakes growing businesses make — and how to avoid them.

Shortly after today’s Wondery story broke, I posted this on LinkedIn:

Wishing the best to my former colleagues at Wondery negatively impacted by these changes.

Some folks will wonder if this means doom and gloom for podcasting. SiriusXM broke up Midroll and Stitcher into various component parts and has a thriving podcast business.

The takeaway to me as an outsider looking in is that it’s easier to make money in podcasting in the old-school ways than the newer “do everything” approaches.

Some great talent is about to hit the podcast market. If you’re hiring, snatch them up.

With no firsthand knowledge about why or how Wondery at Amazon got to this point, I can only offer this take as someone on the outside. But there are a couple mistakes you see at a lot of successful startups that want to keep growing, and they’re two sides of the same coin: Wanting insane growth, and being willing to lose sight of what you are to do it (aka “pivot,” but when no pivot is merited).

I understand capitalism. Companies — especially publicly traded companies — always want to make more money. I get that.

Let’s talk about minimum guarantees

Wondery’s strategy, like many huge podcasting competitors before it, involved spending big on minimum guarantees to sign shows. Minimum guarantees are when you promise a show, no matter how many ads we do or don’t sell, we promise we’ll give you this much money as a minimum.

In theory, when you do that, you project how much money you’ll generate for the show, do the math on what percentage you’d pay that show, and then decide what percentage of that percentage you’re willing to guarantee. If the ad market dips or the show doesn’t sell well, you’re screwed. If you outperform your projections, everyone’s happy — the show earns even more, and you make your margin.

You can get aggressive with minimum guarantee offers, if you’re willing to compress margins. If I want to net 30% and I think I’ll sell $1,000,000 in ads, I expect to pay you $700k. But I’d rather guarantee you, say, $600k and have some room for error. On the flip side, if the show is really competitive to win, I might guarantee you $800k or $900k. I’m not losing money on that deal, in theory; I’m crushing my expected margin.

The trick, of course, is forecasting the right sales projections. If you guarantee the show $1M, or even $1.5M, you’re gonna lose money! Not the full million or more, but a big chunk.

Why would you make such a deal? In theory, to crowd out competitors, or to lure other big shows or big advertisers who come to you for that show but hopefully spend on other shows, too.

Except now you’ve raised the thresholds for what top shows demand. So you might have to stack multiple low- or negative-margin deals on top of each other.

In the movie studio business, you spend a boatload on making and promoting movies, and you know you’re a hits-driven business… And that not every movie will earn out. You hope most will! And you hope that the ones that do more than pay for the ones that don’t.

I’ve seen multiple large podcast companies appear to bet big on show after show, and when you need every show to be a hit, that’s a recipe for disaster.

A hits-driven business is doomed for failure. There’s a reason there are so many analogies out there about successful baseball players getting hits only a fraction of the time. You cannot build your business in a way that requires every guess to work; that’s gambling.

Can you see the problem with audio companies going visual?

The other big challenge I see — not just in the podcast industry, but at so many companies — in the pursuit of ever-greater revenue is the unceasing need to discover the next big thing. I’m not suggesting every business should rest on its metaphorical laurels, or that there’s no need for innovation.

When it comes to podcasting, however, just about every company is currently having endless debates, discussions, and decisions about video. Podcasting, of course, is at its core an audio platform.

Here are three hot takes:

1. Estimates about the percentage of overall podcast listening that happens on YouTube are over-blown, biased by self-reporting. The same kind of response bias that claimed for years that Spotify was the place where most podcasts were listened to, which has remained false since the dawn of the industry through now.

2. Meeting your listeners where they want to be met is good, so go ahead and publish your podcast to YouTube as well if you want. But what makes you (and your team) good at podcasting does not mean you’re good at video.

3. If you took all the money podcast giants spend on video and instead spent it on making more great audio shows, you’d make more money.

Obviously video is huge! And great! But it’s not podcasting.

Not every company needs to do everything. Today, oodles of businesses are trying to think about how to shoehorn generative AI into their products. App makers wonder how they can better gamify their non-game apps. Someone right now is trying to figure out how to build the Duolingo of personal finance, I’m sure.

It’s okay to focus on being great at what you do, and as the flipside of that, focus on doing the things you’re great at. If you built a team of audio professionals, don’t think one video hire is your path to pivoting to video. Video existed when podcasts were born. TV didn’t kill radio. Multiple things can exist.

Podcast companies that scale for the sake of scaling do a worse job at everything that built their initial success: No sales team can expertly sell host-read ads on hundreds of shows, because no sellers can keep all those hosts and personalities and show topics in mind. So you see networks introduce more and more programmatic ads, and sell host-read ads on fewer and fewer shows — only the biggest! — and then you see them go through massive rounds of layoffs.

The Wondery news today could have nothing to do with any of this. But as a consultant these past 2.75 years, I’ve seen many growing businesses wrestle with how fast they should grow, how aggressive they should be, and whether they should be pivoting — most often, it’s true, to video.

My advice is consistent: Focus on slow, steady growth. Don’t imagine you’re peak-pandemic Peloton. Stay true to what got you excited about your business in the first place, and don’t lead or make decisions based on FOMO. I know you don’t want your business left behind. You also don't want it imploded.