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CBS: Outside the Hulu Huddle

Disney's deal to put its content on Hulu means CBS is the only major TV network absent from the fast-growing joint venture of NBC, Fox, and now ABC

And then there was one. Now that Walt Disney (DIS) has struck a deal to put its content on the online video site Hulu, CBS (CBS) is alone among the four major networks not providing programming to the fast-growing two-year-old site.

Disney said on Apr. 30 that it will buy a 30% stake in the TV and movie streaming site founded by NBC Universal (GE) and Fox (NWS). CBS distributes its shows through a wide array of other sites, including its But it may not be able to remain outside the Hulu huddle for long.

There are currently no talks between CBS and Hulu management to put content from CBS or its 50%-owned TV network The CW on Hulu, according to people close to CBS and Hulu. But CBS CEO Leslie Moonves is known to believe that it is only a matter of time before CBS will supply its content to Hulu. His hope is that in return, networks supplying content to Hulu will also provide content to

Pressure on CBS to get the deal done has mounted after Disney's announcement that it will pay an undisclosed amount, said to be $30 million, to become a Hulu partner. As part of the arrangement, Disney will provide shows from ABC as well as select programming from its Disney Channel and ABC Family, and older family movie titles from its Walt Disney Studios.

CBS initially rejected the idea of putting its shows, including CSI: Crime Scene Investigation, on Hulu when the site launched in 2007. CBS executives at the time intimated that they did not want to be restricted to an exclusive arrangement with the site. The network also chafed at Hulu's insistence that it keep 30% of the ad revenue generated by CBS's shows and movies. CBS was willing to give up something closer to 10%, say people with knowledge of the discussions. CBS also objected to Hulu's insistence that CBS not distribute its content to sites other than Hulu, sources say.

Bad Blood

Since those talks, Hulu has become an online phenomenon, racking up 380 million video views in March alone, according to ComScore (SCOR). Hulu has vaulted past Yahoo! (YHOO) to become the third-most-watched video site in the U.S., behind only Google's (GOOG) YouTube and News Corp.'s (NWS) MySpace. Hulu is also said to be in talks with the music industry's four largest labels to create a destination that would provide an array of music content, competing with YouTube's, which provides music videos from Vivendi, Warner Music (WMG), EMI, and Sony Music Entertainment (SNE).

But hammering out a content-sharing deal with Hulu may not be easy for CBS, which has bad blood with the Hulu partners. In February, Hulu pulled its service from after what insiders say was a nasty fight over whether CBS, which has aggressively put its TV shows on other sites, would add its content to Hulu. Hulu had made the deal when was owned by CNET, which CBS bought for $1.8 billion in March 2008.

CBS, which currently provides its TV shows to more than 100 separate online sites, isn't ruling out starting up talks with Hulu. In a statement, CBS said it has "long employed open, non-exclusive content partnerships that allow fans across the Internet to engage with our programming [and that it will] continue to discuss similar arrangements with additional partners." But it cautioned that it intends to do deals only "in such a way that we control our distribution, sales, and profit."

How soon will CBS and the Hulu partners get together for talks? Hard to say. But the history of competing online sites in the entertainment world is already dotted with casualties. The music industry never recovered from dividing ranks among music download services. Ditto for movie studios, which combined forces behind the Movielink site too late to stop it from being sold to Blockbuster. And for all its traffic, Hulu isn't yet profitable, industry watchers say. Adding ABC shows should help. So would having content from CBS, currently the top-ranked TV network.

Grover is Los Angeles bureau chief for BusinessWeek.

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