Hulu's tug of war with TV

But in making a bid for the next generation of Internet- attuned viewers, Hulu's owners have strained their lucrative relationships with cable and satellite operators. Companies like Time Warner Cable Inc. and DirecTV Group Inc. pay cable networks billions of dollars each year to carry programming. Believing that they should have exclusivity because their payments support the enormous cost of producing TV shows, such companies have been pushing back against the Hulu freebies.

Investors also are wary that the media companies' embrace of the Internet-content-should-be-free philosophy threatens one of Hollywood's biggest profit centers: cable programming.

"If you give away your premium content for free, you are basically hastening your own demise, signing your own death warrant," said Laura Martin, a media analyst with Soleil-Media Metrics. "There is a choice that companies have to make."

Hulu illustrates the quandary that media executives face as they weigh the potential of the Internet against their dependable, old-line businesses. If the television industry does not find a way to preserve its two pillars of revenue -- advertising and subscription fees -- the consequences could be dire. Analysts point to the rapid deterioration of newspapers, which traded paying print subscribers for the expectation of big bucks from online advertising that have not materialized.

The conflict has forced Hulu to make concessions that have hurt users who have come to expect a rich menu on the video site. In recent months, entire seasons of "It's Always Sunny in Philadelphia" were abruptly taken off the site, along with episodes of other cable TV shows such as "In Plain Sight" and "Psych."

Hulu even blocked access to a technology that lets its users watch content on their TVs. The move provoked outrage among fans of the software, called Boxee, drawing 385 angry comments on the company's website.

"Big Media had better come out of their hole and embrace the power of Internet streaming or they'll be in big trouble down the road," wrote one poster who identified himself as Lew Ciokiewicz.

Hulu's pullback in the case of "Always Sunny," one of the site's early favorites, underscores the tug of war within established media companies over the wisdom of placing TV shows on the Internet for free.

The quirky sitcom about a group of slackers has become a signature of the FX cable channel. (FX is a division of Fox, whose parent company, News Corp., is one of Hulu's founding partners.)