Disney Climbs Aboard Video Site Hulu,

The Hulu deal includes ‘Grey’s Anatomy,’ but doesn’t include the popular cable show’Hannah Montana,’ at left.

By SAM SCHECHNER and ELIZABETH HOLMES

Walt Disney Co. took a major step to reshape the Web-TV landscape by jumping aboard video site Hulu, a move that brings together three of the biggest broadcast and cable network owners under the same banner.

Disney Channel

The Hulu deal includes ‘Grey’s Anatomy,’ below, but doesn’t include the popular cable show’Hannah Montana,’ above.

ABC

In joining Hulu, Disney is ceding some control over the online distribution of its ABC television and other programming in exchange for an equity stake, marking a shift in the digital strategy of the entertainment giant.

Thursday’s announcement caps nearly four months of debate within Disney, as executives have weighed whether to seek more viewers by putting ABC television shows in the hands of a site co-owned by direct competitors. Hulu is a joint venture of General Electric Co.’s NBC Universal and News Corp. (News Corp. also owns The Wall Street Journal.)

Disney will invest an unspecified amount of cash and commit to $25 million for marketing, according to people familiar with the talks. The amounts would be the same as what NBC Universal and News Corp. pledged when they formed the venture in 2007, these people say.

Each of the networks will now hold a roughly 27.5% stake in the venture, down from the 40% original stake held by NBC Universal and News Corp.

The remaining share will be divided between private-equity firm Providence Equity Partners and Hulu staff.

In return, Hulu will be the first outside site to stream ABC’s full-episode television programming itself. Hulu will soon stream ABC TV shows such as “Lost” and “Grey’s Anatomy.”

The site will also be home to archived titles from Disney’s TV and movie library, along with shows from ABC Family and Disney Channel.

The deal doesn’t currently include some of the most-watched cable programming in the Disney-ABC Television Group portfolio, such as “Hannah Montana” and the “High School Musical” franchise. Keeping those titles only on Disney sites could sidestep complaints from cable operators, which have objected to programmers’ splashing shows across the Web.

Both NBC Universal and News Corp., which owns Fox , also extended their exclusivity agreements by a year with Hulu, which were set to expire at the end of 2009, according to Peter Chernin, News Corp. president and chief operating officer.

Now all three networks will have their content exclusively on their own Web sites and on Hulu, Mr. Chernin said.

Hulu operates on a revenue-sharing basis with its content partners; Hulu ads sales teams don’t sell against one show but rather in “buckets” of programming grouped by audience. Only the content providers — meaning the media company providing the videos — are able to sell ads tied to a specific video.

Anne Sweeney, president of the Disney-ABC Television Group, said the deal was “an evolution of the strategy” to expand the company’s audience. ABC.com viewers are older and female, while Hulu’s are younger and male. CBS Corp. is the only major broadcast network not participating in Hulu. CBS puts its shows on a wide array of sites, such as Veoh, but without offering them to any exclusively. Quincy Smith, head of CBS Interactive, has said he wouldn’t rule out putting some shows on Hulu in the future, on a nonexclusive basis.

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