Hulu answered one of the most important questions about the live streaming service it plans to offer this year by announcing today that it will include CBS-owned stations.

That means the offering should have all of the big four broadcast networks, potentially making it a potent challenger to AT&T’s DirecTV Now — which currently doesn’t have CBS — and other online alternatives to the traditional cable and satellite TV bundles.

(Last month CBS chief Les Moonves told investors that he’s “assuming we’ll be able to make a deal” with DirecTV Now.)

“We’re now starting to form a great line up of channels and we’ll have some other deals before we launch,” CEO Mike Hopkins told the Citi Internet, Media & Telecommunications Conference taking place at this week’s CES consumer electronics show.

The CBS agreement will include CBS Sports Network and POP and has “the potential to add additional networks in the future,” the company says. It also extends an existing deal to offer Showtime as an add-on premium service.

Hulu is expected to pay CBS a monthly fee of more than $3 per subscriber, which could hit $4 with annual price hikes and if additional services including CW and Smithsonian Channel are included.

Hulu already has deals with three of its owners — Disney (ABC), Fox, and Time Warner — and is negotiating terms with Comcast (NBC).

But CBS has been a question. The broadcaster also offers its programming live to subscribers of its own CBS All Access service. It’s expected to be the only place where fans of CBS shows can watch an entire season of episodes on demand; Hulu and others probably will offer a smaller collection of episodes on demand.

While he “won’t have hundreds of channels” like cable and satellite offer, “we’ll have the best channels,” Hopkins says.

In addition to the CBS announcement, Hopkins says that the live streaming service will cost less than $40 a month, a price that will include the current $8 subscription on demand product. It also will have what the CEO describes as a “world class cloud DVR service.”

The under-$40 price is the “everyday price,” not a promotion, and will probably include two streams — with opportunities to pay more for additional streams.

Deals with CBS and other broadcasters include live access to shows on the stations that they own within those local markets. To reach other communities, Hulu will have to reach agreements with affiliate owners. Hopkins says that at launch he will have deals covering the “vast majority” of the country.

In areas without local deals, network shows will be available on demand after they first air.

Hopkins says that Hulu’s experience selling ads, as well as subscriptions, will give it an edge over other streaming services.  It means Hulu needs “a lower number of subscribers than our competitors need” in order to become financially viable.

He’s also optimistic about the “opportunity to transform advertising” by using digital technology to target different spots to different viewers, selling them at a premium price.

“That’s something we’ll be able to do that’s a little bit better than others,” Hopkins says.

The average age of Hulu viewers is 33. “That’s one reason our ad business has been flourishing,” he says.

Hopkins also talked up Hulu’s user experience. “That’s the way you manage churn in this business” where it’s easy for subscribers to cancel. Thus far, he says, the privately held company has increased its revenues and subscribers at a rate of more than 30% a year.