By Shalini Ramachandran

CBS Corp. is nearing a deal to license its broadcast network and some cable channels for Hulu's forthcoming cable-style, live-streaming service, people familiar with the matter said.

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, the people said, which is 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.

The companies are expected to announce the deal Wednesday, the people said.

Hulu won't be getting full current seasons of popular CBS shows like "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.

Hulu has already signed up other major network groups, including Walt Disney Co., 21st Century Fox and Time Warner Inc., to offer channels on its live-streaming service, set to be priced around $40 a month and debut inearly 2017. 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.

CBS has taken an unorthodox approach to digital distribution and hasn't been afraid to hold out from the likes of AT&T Inc.'s DirecTV Now and Dish Network Corp.'s 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. CBS executives have said they are open to licensing to new entrants so long as the price is right, noting a recent deal with Alphabet Inc.'s YouTube.

The robustness of CBS All Access has stoked ire among some distributors, who privately complain that the service is now a better product than the one CBS sells them. CBS offers full current seasons of shows like "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 that 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 potential risk to CBS's long-term growth.

CBS executives have brushed off the threat, noting that as the No. 1 network, CBS's absence would hurt distributors. Plus, a subscriber to CBS All Access pays roughly three times more than a traditional pay-TV distributor pays per subscriber.

CBS's pact with Hulu shows that, 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 that Hulu is owned by CBS's direct rivals: Disney, Fox, Comcast Corp. and Time Warner.

While the deal means CBS will license its programming for Hulu's live-streaming service, it doesn't include any additional programming for Hulu's existing subscription on-demand service, which costs between $7.99 and $11.99 a month.

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

(END) Dow Jones Newswires

January 04, 2017 12:14 ET (17:14 GMT)

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