Thursday, entertainment empire Disney fired a loud salvo in the struggle to unseat YouTube as the king of online video. Disney, parent company of TV network ABC, announced an agreement to join forces with free online video service Hulu.com.

Disney will join Hulu’s other content partners, NBC Universal, and News Corporation, as well as Providence Equity Partners as a joint venture partner.

This new partnership between is a smart step for Disney and for Hulu. Hulu gets access to both current popular ABC and Disney shows as well as classic Disney family fare. Disney (and ABC) can serve up ad-supported streams of their content, on a site that allows its users to set up subscriptions and a viewing queue. [We hope and pray that the Hulu player will take up the old ABC player’s HD capabilities, but lose the really annoying “click to continue” interruptive advertising model.]

What we are most curious to see working out, is how and whether Hulu will take on YouTube for a larger share of the online video-audience pie. The pie itself is growing: comScore found that U.S. Internet users viewed 14.5 billion online videos during the month of March, a jump of 11 percent over February 2009.

comScore also reported that Hulu broke into the Top 3 sites with the most videos viewed during March as well, and its users watched for a longer duration than users of other top online video sites. However, Google’s YouTube far outstripped its nearest competitors (mySpace, Yahoo! and Hulu), gobbling up 40.9 percent online video market share (compared to Hulu’s eensy 2.6 percent).

If the content on Hulu is more desirable, and the interface is more attractive and easier to use than at YouTube, perhaps viewers will eventually turn their attention there. But Hulu will have to do more than that to lure a larger share of the online video audience. YouTube has been scrambling in recent weeks to improve the site, becoming more “social,” with Twitter updates and social networking features, along with functionality improvements like easier uploads from mobile devices and an educational video hub.

Will Hulu (and its content partners) have the stamina and budget to challenge YouTube?

Details of the Disney-ABC/Hulu partnership after the break.

The specifics of the deal:

The agreement will add a significant chunk of programming to Hulu’s line-up through expanded online distribution of Disney’s most popular current and library primetime series and their back catalog of feature films (“Million Dollar Duck,” or “Apple Dumpling Gang,” anyone?).

In particular, full-length episodes of hit current and library programs from ABC, including Lost, Grey’s Anatomy, Desperate Housewives, Private Practice, Ugly Betty, Scrubs, Greek, Hope and Faith, Less Than Perfect, Wizards of Waverly Place, Phineas and Ferb, Who Wants To Be A Millionaire, General Hospital, The View and The Secret Life of the American Teenager will soon be streamed on Hulu on an ad-supported basis.

“Disney has sought to meet the constantly evolving viewing habits of our consumers, and today’s Hulu announcement is the next important step in that ongoing journey,” said Robert A. Iger, president and CEO, The Walt Disney Company.

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