Of the new internet startups that have emerged in the past few months, one of our favorites has to be Boxee, the streaming social media center from the team that created the acclaimed XBMC frontend. Boxee (currently still in Beta) combines popular video and podcast streams from CBS, ABC, and PBS into one slick and functional media center that turns any connected computer into an internet TV receiver. One of the best features was that it supported streaming from Hulu, which meant users could navigate through thousands of hours of content (e.g. all of Arrested Development) without opening a web browser.

Unfortunately, that is no longer the case.

Just today, Boxee announced that they would be discontinuing support for Hulu streaming after content providers complained and demanded that the Boxee service be shut off. In a sobering blog post, Boxee CEO Avner Ronen informed users that as of this Friday, Hulu streaming would be unavailable via their service. “We have many content partners who are generating revenue from boxee users and we will work with Hulu and their partners to resolve the situation as quickly as possible,” said Ronen. In the Boxee beta, content from Hulu retrained all of the advertising that users would see when watching a video on Hulu.com, so the issue doesn’t appear to be related to missed ad revenue opportunities. Ronen also stated that Boxee beta testers streamed 100,000 videos from Hulu just last week alone.

Hulu, for their part, has posted a related entry on their blog explaining the motivation and reasoning behind this development. Jason Kilar, Hulu’s CEO, acknowledges that users do not benefit from this action, but that they are acting to satisfy the requests of their content providers – without whom Hulu would not exist.

Both posts infer that this is not the end of the matter, and Boxee specifically states that it will continue pursuing a resolution that would allow Hulu to come back to the Boxee app. But until then, this is a huge blow to a fantastic service; one which we hope will not prevent new users from trying it out when the Windows Beta becomes publically available in the next few months.

We’ve contacted Boxee and Hulu for more insight into this news, and will report when more updates become available.