CBS CBS Corp

By Shalini Ramachandran 

Hulu struck a deal to license CBS Corp.'s broadcast network and cable channels for its forthcoming live-streaming service, adding to its lineup ahead of a highly anticipated launch in the coming months.

CBS will bring in more than $3 per monthly subscriber initially for its channels, with increases over the multiyear deal that could get to more than $4, people familiar with the matter said -- more than what it makes from traditional pay-TV distributors. The arrangement includes carriage of CBS Sports Network and Pop, the pop culture cable channel CBS co-owns with Lions Gate Entertainment Corp.

The pact also offers the option for Hulu to include CBS's Smithsonian Channel and the CW Network in the future, and allows it to sell CBS's premium network Showtime as an add-on to the live-streaming service. Hulu already allows subscribers to its subscription video-on-demand service to buy Showtime for an additional $8.99 a month.

Hulu Chief Executive Mike Hopkins announced the news of the agreement with CBS at a Citi investor conference in Las Vegas on Wednesday, confirming The Wall Street Journal's earlier reporting.

Hulu won't be getting full current seasons of popular CBS shows such as "NCIS" on demand, which will remain exclusive to CBS's own streaming service CBS All Access, the people said. Hulu will receive a few recent episodes of such shows to offer on-demand for customers of the new live service.

Mr. Hopkins also revealed the live-streaming service will cost "under $40" and include Hulu's existing subscription video-on-demand library, which on its own typically costs subscribers between $7.99 and $11.99 a month. Hulu's deep library, with full old seasons of shows such as "Seinfeld," and an existing subscriber base of at least 12 million could give it a leg up as it competes with other live-streaming rivals such as AT&T's DirecTV Now, Dish Network Corp.'s Sling TV and Sony Corp.'s PlayStation Vue.

Hulu has already signed up other major network groups, including Walt Disney Co., 21st Century Fox and Time Warner Inc., and said it is in talks with Comcast's NBCUniversal and other companies. The streaming service hopes to offer a more personalized, intuitive version of cable TV than that offered by traditional pay-TV distributors and even newer streaming entrants. Hulu's offering also includes a cloud-based digital video recorder and many local station affiliates signed up at launch.

Getting CBS on board may also help Hulu differentiate its service. CBS has so far taken an unorthodox approach to digital distribution and hasn't been afraid to hold out from the likes of DirecTV Now and Sling TV, even as its rival media companies have signed on.

CBS's strategy has been to charge some $2 per monthly subscriber to its traditional cable and satellite distributors, about $4 for new live-streaming entrants and $6 for subscribers to its CBS All Access streaming service.

The robustness of CBS All Access has stoked ire among some distributors, who privately complain the service is now a better product than the one CBS sells them. CBS offers full current seasons of shows such as "NCIS" for on-demand streaming through All Access, but it holds back those rights from traditional partners unless they pay much more.

Some distribution executives believe as CBS All Access gains more subscribers, it becomes easier for them to justify going without CBS if it demands too high a rate, posing a long-term risk to CBS. CBS executives have brushed off the threat, noting that as the No. 1 network, CBS's absence would hurt distributors.

CBS's pact with Hulu shows, at least for now, the network is figuring out a way to have its cake and eat it, too -- striking deals with distributors while maintaining a stand-alone streaming service with some 1.2 million subscribers.

It is also noteworthy Hulu is owned by CBS's direct rivals: Disney, Fox, Comcast Corp. and Time Warner.

While Hulu loses money today, Mr. Hopkins said he expects the service to become profitable over time. Hulu's targeted advertising capabilities can help it "transform advertising" for traditional television and make money, he said.

"I don't anticipate us perpetually being in a loss mode."

Write to Shalini Ramachandran at shalini.ramachandran@wsj.com

(END) Dow Jones Newswires

January 04, 2017 16:02 ET (21:02 GMT)

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