By Shalini Ramachandran

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

CBS will receive more than $3 per monthly subscriber for its channels initially, with its take under the multiyear deal possibly rising above $4, people familiar with the matter said. Those rates exceed what it charges 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 gives Hulu the option 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 video-on-demand service to buy Showtime for an additional $8.99 a month.

Hulu Chief Executive Mike Hopkins announced the agreement with CBS at an investor conference in Las Vegas on Wednesday, confirming a report by The Wall Street Journal.

Hulu won't be getting on-demand access to full current seasons of popular CBS shows such as "NCIS," 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 servicewill cost "under $40" and include Hulu's existing subscription video-on-demand library, which on its own costs subscribers $7.99 or $11.99 a month. Hulu's deep library, with full seasons of past 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 Inc.'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 Corp.'s NBCUniversal and other companies. The streaming service aims to offer a more personalized, intuitive version of cable TV than that offered by traditional pay-TV distributors and even newer streaming entrants. At launch, Hulu's offering will also include a cloud-based digital video recorder and many local station affiliates.

Getting CBSon 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 rival media companies have signed on.

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

The robustness of CBS All Access has stirred up 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 CBSif 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 that at least for now the network is finding 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. Moreover, the deal with Hulu involves CBS's direct rivals; the streaming service is owned by Disney, Fox, Comcast 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 05, 2017 02:48 ET (07:48 GMT)

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