Disney buys stake in US video website Hulu

Disney has signed a content deal with US online video website Hulu, in exchange for a 25% per cent stake in the company, enabling users to see full episodes of Ugly Betty and Desperate Housewives for free.

The popular US-only site, jointly owned by NBC Universal, News Corp and Providence Equity Partners, has become the second largest video website in the US, with 350m clips viewed between February to March 2009. It still trails video-sharing giant YouTube.

The addition of Disney to the board and list of content providers will see popular programming from its ABC network streamed for free on Hulu, including episodes from major TV series such as Lost, Scrubs and Ugly Betty

Disney paid a “modest sum” for the deal, which is still subject to closing conditions and regulatory review. However, unlike Hulu’s previous agreements with NBC and News Corp, Disney has not paid a large fee and still retains control of the number of third party episodes aired on the site.

The Disney deal leaves CBS as the only major US broadcaster not to share its programming with Hulu. Instead CBS has backed its own free ad supported streaming site, TV.com, which it acquired from CNET in 2008.

Both TV.com and Hulu are understood to be in talks with potential partners for UK roll-outs of the respective services. Plans by the BBC, ITV and Channel 4 to launch a joint video on-demand platform, better known as Project Kangaroo, were blocked by the Competition Commission earlier this year so there is a gap in the market for a similar free ad-supported streaming service in the UK.