• by Steve Smith , Staff Writer @popeyesm, June 3, 2010

Rumors were flying that hulu would become a paid service on the Xbox Live game console platform. The story got started with a blog post on Gear Live, which claims an unimpeachable source says Microsoft will announce and demo the service at the upcoming E3 gaming expo.

According to Gear Live, hulu will sit as an app on the Xbox Live interface in much the same way Netflix does now.

The game news and reviews site 1Up has sources that confirm a hulu app for the Xbox does exist and that Microsoft is actively running it in tests. But as most video industry veterans know, putting hulu onto a set top box of any kind is problematic on the most basic level - rights. Time shifting prime-time TV content from NBC, ABC, and Fox with far fewer commercial breaks per hour on the desktop PC is one thing. Piping it back onto the living room TV where programming and ads compete with the network's golden goose is quite another. 1Up reports that rights problems are the last obstacle to a roll out. No kidding. Having all of these property owners agreeing to hulu without modification on a TV would be a major shift in TV network thinking.

Of course, one possible scenario is that hulu on Xbox could use a very selective library of older programming much like Netflix's carefully windowed "Watch Instantly" trove of TV shows. But would a diminished hulu be a hulu at all?

No one knows how and how much the service will run, but the rumor is that the Xbox iteration is where we will see the first paid hulu model. The Xbox works on a points system rather than straight cash. You buy Xbox Live point online or on cards at gaming stores and apply them against game downloads, video rentals, etc. If this rumor is true, it will be interesting to see both how much hulu will charge, for access to how much content, and how Microsoft will be involved in the bundling or the transaction.

An unanticipated and negative consequence of adding such a popular service to the Xbox 360 is that it will reveal to a larger audience just how troubled this hardware is. I speak out of experience and no small amount of bitterness. After a blissful month of Netflix use on my high-end Xbox 360 Elite model I suffered the infamous "Red Ring of Death" from my console the other night. Known to gaming fans far and wide, the malady is named after the three red lights that form around the console's power button to indicate a major malfunction. Two Xbox units of mine have now fallen to the Microsoft gaming plague, and I know many others in the same boat. To be charitable to Microsoft, this hardware design was not ready for market, and it is unclear that the company has worked out the kinks years into the product lifecycle.

Hulu on your Xbox? Maybe. Enjoy it while you can. Meanwhile, I will be waiting for Microsoft to swap in a new unit...my third Xbox 360 in four years. Maybe this one will survive long enough for me to test Project Natal in the fall.