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Hulu plans subscription service

Hulu, the free online site for watching television programs, plans to begin testing a paid subscription service as soon as May 24.

Under the proposal, Hulu would continue to provide for free the five most recent episodes of shows like Fox’s “Glee,” ABC’s “Lost” or NBC’s “Saturday Night Live.” But viewers who want to see additional episodes would pay $9.95 a month to access a more comprehensive selection, called Hulu Plus, sources told the newspaper. Cable networks would not offer content under the paid plan.

Hulu, which ranks second only to Google’s YouTube in terms of monthly video streams in the United States., said it turned an operating profit in its two most recent quarters. Owned by media giants News Corp., NBC Universal and the Walt Disney Co., Hulu, two years old, generated more than $100 million in revenue from advertising.

Still, that income doesn’t come close to matching the revenue that these companies are accustomed to making from their broadcast businesses. That’s why Hulu is under pressure from its owners to collect a subscription fee to both bolster revenue and train viewers to pay for online access to professionally produced content.

The television executives don’t want to suffer the same fate as music industry or newspapers, which saw users flock to free access to songs, stories and classified ads online as revenues plummeted, the newspaper said.

Hulu also has plans to tie its subscription service in with a new application for Apple’s iPad. However, according to MediaMemo, Hulu’s iPad subscription aspirations could be devalued by a free streaming video application from ABC already available on the App Store.

According to MediaMemo, Hulu CEO Jason Kilar “tried desperately to get ABC not to introduce its free app,” because ABC giving away free content makes subscription-based access to Hulu on the iPad seem less valuable. ABC obviously did not place much weight behind Kilar’s concerns, as the network’s streaming application was available on the iPad from day one and has found great success.

ABC’s embrace of the iPad should come as no surprise, as the network is owned by Disney, of which Apple CEO Steve Jobs is the single largest shareholder. After the iPad was announced, Disney chief executive Bob Iger called the iPad a “game changer” and said his company has major plans for interactive content on the device.

Hulu’s subscription move also reflects a larger trend. As the major television networks try to extract payments from cable operators and television station groups, they can no longer justify offering the same shows online for free.

Hulu’s programming also carries commercials, however there are fewer spots there than on broadcast television. Hulu is ultimately expected to adopt the same commercial loads as network television. Hulu has not commented on the “LA Times” story.