Greetings from Brooklyn, and welcome back to What I’m Hearing+, my weekly streaming companion to Matt’s WIH franchise. In tonight’s edition, a close look at the M&A game theory behind Bob Iger’s mysterious intimation that “everything is on the table” when it comes to Hulu. The platform economic question is way more complicated than it seems. But first…

• Not Quite the Last of Us: If people were worried about what would replace Succession, they can rest assured that HBO, as always, will be fine. The Last of Us finale brought in 8.2 million viewers, according to HBO, with the series averaging just over 30 million viewers per episode to date. That’s larger than House of the Dragon (29 million viewers per episode) and just behind the seventh and eighth seasons of Game of Thrones (32.5 million and 40 million, respectively). Even better music to David Zaslav’s ears? The vast majority of viewers tuned in via HBO Max.

Last of Us proved that well-made video game adaptations are indeed about to enter their comic book golden era. Everyone wants one, everyone’s bidding on one, everyone’s currently making one. My personal most anticipated? God of War at Amazon Prime Video from Wheel of Time showrunner Rafe Judkins and Horizon Zero Dawn from The Umbrella Creator Steve Blackman. HBO set the bar high with The Last of Us, but prepare for the wave of high-budget game narratives on all your streamers.

• The Big Short’s Big Win: Demand for The Big Short and Margin Call shot way up over the last few days following the collapse of Silicon Valley Bank. This isn’t too surprising; purchases of Contagion shot way up when Covid started, too. But it’s always fun seeing how search interest for non-streaming films jump as viewers look for something timely to watch. While Margin Call is streaming on Prime Video in the states, The Big Short is nowhere to be seen. We’ll see what those piracy numbers look like in the days ahead…

There are a multitude of reasons. Perhaps Disney, which seems to be optimizing free cash flow, could see the wisdom in forking over $9 billion for Hulu. But Iger also likely knows that the platform’s value has been reduced as competitors have pulled content to fuel their own streamers. Meanwhile, Comcast C.E.O. Brian Roberts probably doesn’t want to endure the extraordinary regulatory headaches of a $22 billion deal when the company likely needs to leverage its dry powder (and government relations) for a forthcoming conversation with Warner Bros. Discovery, as my Puck partner Bill Cohan has noted extensively, or perhaps Paramount Global.

And then there is Hulu itself, a business with divorced corporate parents—Roberts’ late-stage bid on 21st Century Fox forced Iger to shell out another $17 billion or so to acquire the company—with $90 billion in debt that made a whole lot more sense in the pre-everyone-has-their-own-streaming platform era, as the sort of Spotify of linear. Alas, all the effort in originals has yet to elevate it beyond that initial value point.

I’ve previously discussed at length how Disney could benefit from holding onto Hulu—keenly, using it as a “freebie” to help retain customers in the bundle while keeping the Disney brand protected within Disney+—but the other reason to keep the company may simply be that there isn’t an obvious buyer in 2023 at the price point Disney wants. Hulu worked best when its primary value proposition was as a platform for licensed content from the likes of NBC, CBS, Fox, etcetera—a second bite at the apple for networks and studios that hadn’t yet established their own streaming presence. If those days are over, then what’s the underlying platform—the technology and nearly 50 million subscriber base—really worth, especially for a domestic product in an increasingly international business?

With all of these questions circulating, it’s worth exploring the three biggest roadblocks that Disney will face in its attempt to potentially sell its most confounding service.

At the time that Disney acquired its majority share of Hulu, in 2017, as part of the Fox deal, the streamer had built a large and successful subscriber business as a distribution channel for its owner-partners, including Disney/ABC, Fox/FX, and NBCU. But demand for Hulu’s original content never grew fast enough to offset the decline in programming that was clawed back by other streamers. Last quarter, for instance, demand for Hulu originals made up only 10.5 percent of all titles in its catalog, according to Parrot Analytics, where I work as director of strategy. At newbie Paramount+, originals constitute 13.5 percent of catalog demand. At Disney+, a whopping 32 percent of demand comes from originals. Those numbers are backed up by other data sources, including Nielsen, where Disney+ originals like The Mandalorian and She-Hulk regularly top the charts. Few Hulu originals do the same—and the ones that do are FX titles.

It’s true, as I’ve written before, that Hulu adds billions of dollars in market value to Disney as part of its streaming bundle, which boosts its total subscription number by nearly 25 percent. It also functions to reduce churn, by increasing the perceived value of the Disney subscription. But that perceived value is also decaying over time as NBCUniversal takes back its next day availability, and titles like Saturday Night Live disappear completely. If Hulu originals can’t make up the difference—something Iger has effectively admitted via his stated concerns about general entertainment programming during the earnings call—then Hulu will remain reliant on buying third party content. Therefore, that’s a doable but an expensive proposition for Iger at a time when practically all of the streamers, from WBD to Peacock, are looking to maximize capital efficiency by becoming sellers, effectively selling re-runs to OTT platforms.

It’s also unclear how much more Hulu can grow. At 48 million subscribers domestically, Hulu already has more than half the U.S. subscriber base of Netflix, a much better capitalized business that is struggling to grow itself. At least Netflix is diversifying its content portfolio with a mix of originals and licensed fare. Iger, who has said he’s skeptical of “general entertainment programming,” seems to want to invest less in Hulu general entertainment originals—and he’s not about to place Disney+’s best original content on Hulu, either. Sure, Hulu has optionality as a buyer of third-party content. But what value does that leave for Hulu on the M&A market if potential buyers also own their own streaming platforms? Could Hulu operate as a FAST platform? Comcast had that with Peacock and moved away from it. Fox as Tubi, Paramount has Pluto TV, and Warner Bros. Discovery is launching its own. That’s the question that Disney is trying to answer.

The explanation comes down to the tension between the production of original series, which drive subscriber acquisition, and the development of catalogs, which includes library titles and licensed series, and are vital for subscriber retention. Netflix leans hard into the former, with C.E.O. Ted Sarandos telling analysts that Netflix needs a Wednesday a week; Par+ has the non-Yellowstone entities of the Yellowstone franchise; Hulu has Only Murders in the Building and The Bear. But in a sea of oversaturation, standing out takes more than just a few great original shows: it means having a global presence. As one advisor to Disney told me, there’s a lack of evidence that FX is working in any meaningful differentiated way to make a huge difference to Hulu and Disney right now.

Netflix became a $200 billion company not because it had the greatest shows on the planet (to be fair, it’s worth $130 billion right now), but because investors and analysts appreciated the value of its first-mover strategy, especially in international markets. When all the other major streamers launched, they did so with global in mind. Companies like Paramount and Comcast partnered to launch collaborative efforts like SkyShowtime in certain European markets to better compete against global superpowers, notably Disney+, Netflix, and Amazon Prime Video. While Hulu was designed as a global brand under Iger, it changed under Chapek. Hulu content would become discoverable internationally under Star, which is now integrated into Disney+ in many countries or exists as a standalone brand (Star+) in others. Star’s success has arguably proven that Hulu is irrelevant; these titles could be added to Disney+ at a slightly higher cost and likely not run into calamitous churn results.

Plus, pivoting Hulu in its current form to global markets is a thorny proposition since plenty of the content is wrapped up in regional contracts that won’t travel overseas. There’s a reason that Star is full of Disney-owned general entertainment content: dealing with rights agreements is both costly and a huge pain. It’s still a lucrative business for the big American conglomerates to license out their content, across broadcast to premium cable, to local networks or platforms in various European, Latin American, and Asian Pacific markets. When Hulu did go international, it was solely to Japan—and that version of Hulu was a barebones approach. That’s not something you can launch in today’s overly competitive global market.

Hulu isn’t poised to scale at the speed Disney and its shareholders hope for, and it’s not going to be a major global player under the Mouse House umbrella. Nor is it going to be a major international play for any of the other companies already rolling out international versions of their branded projects. It may be an interesting proposition for a U.S.-focused conglomerate, but there aren’t many of those left, and although Hulu’s subscriber base is meaningful, its growth rate is slowing and its content is disappearing.

What I would love to see happen is something that Jason Kilar, former WarnerMedia C.E.O. and the founding C.E.O. of Hulu, tweeted about this past weekend: spin off Hulu and turn it into an aggregator platform for all the various content going through new windowing strategies. This is effectively how Hulu started out. Since all of the players had a piece of Hulu, they saw reasons to invest in it (sharing content) and it became a one-stop shop for great entertainment. Then, those same companies started licensing to Netflix thanks to stronger offers in competitive negotiations, and Netflix came out ahead.

I’m not suggesting that Paramount, Disney, and WBD come together again to invest in Hulu as a third-party platform. For a buyer—either within media or private equity—that wants to take control of a medium that has a substantial number of subscribers, and could become a platform that cycles in licensed content from the key conglomerates looking to better optimize their portfolios, Hulu isn’t a half-bad option. This would have to exist with new subscriber targets, but it could exist as a sustainable, cheaper platform for second or third run series and films that’s ad-powered. Heck, Disney could theoretically spin it out and operate it as its own business so it’s not reflected on the balance sheet.

In any case, it feels less and less likely that Hulu will simply continue to exist in its current form. There’s too much debt, and too much principal debt, that these companies need to pay down before they invest in another owned and operated platform. But what Hulu represents—a widely subscribed to streaming platform that needs catalog entertainment to keep customers satisfied with some room for investment in original content—is important to the industry now more than ever. We’re all thinking about the future of Hulu in black-and-white terms, but the reality is more of a hazy-gray, and a much harder problem with no clear solution.