Content is indeed king.

The transformation of the “TV business” into the “content business” has accelerated to a gallop, forcing the industry to face the harsh realities of trying to run a traditional network in an on-demand world.

The signs of upheaval were impossible to miss last week as the major networks closed out upfront season with 2015-16 schedule presentations that emphasized how much they recognize that there’s no such thing as a status quo anymore.

“The erratic schedules of the past just don’t work anymore,” Fox TV Group chair Dana Walden told the crowd in her first upfront presentation as head of programming. Her partner atop Fox, Gary Newman, vowed that Fox would redouble its efforts to “market (shows) relentlessly and create events that break through and captivate viewers across every platform.”

The sense of urgency emphasized onstage comes at a time when the traditional economic model for broadcast and cable outlets could be charitably described as under siege. The advertising market is in a state of upheaval that shows no signs of settling down. “Day­parts are dead” as an organizing principle for ad buys, Turner Broadcasting ad sales chief Donna Speciale declared at the cable network’s presentation, acknowledging one of myriad ways that business norms are changing for ad buyers and sellers.

Moreover, live television viewing is dwindling to levels that alarm most showbiz CEOs. Younger viewers are spending more time with smartphones and tablets, and less time glued to linear TV channels. The virtual disappearance of reruns in primetime has hiked programming costs for networks while wiping out a once-bankable source of income for writers, actors and directors. And the competition for original series has spread so far and wide that the talent pool of creatives is stretched perilously thin. Just ask any network that has opted to reboot an old movie or TV series after a frustrated search for promising new material.

“How do you create content that connects in a world of total choice?” ABC Entertainment Group president Paul Lee mused. “The era of least-objectionable programming is dead.”

To that end, the shift in focus from renting to owning shows is the single biggest change evident in all that was said and spun at the upfronts. Content-
licensing to digital and international outlets has become a crucial part of the profit mix for scripted series. To make the most of those opportunities, networks and their vertically integrated parent companies need unfettered control of the shows they run — and that means ownership. That focus is clear in the higher volume of shows proportionately, compared with last year, that ABC, NBC and Fox ordered from sibling studios. It was unquestionably a tougher environment this year for new and returning series orders for free agents Warner Bros. TV and Sony Pictures TV.

In his remarks on a quarterly earnings call on May 6, 21st Century Fox chief operating officer Chase Carey articulated a clear mandate for the network, which is digging out of a ratings downturn. “We … need to control a much wider set of rights to the content we distribute. The days of slicing and dicing rights are over,” he said. “In order to create the best consumer experience and maximize the value of our content and networks, we need to … create our own product.”

It’s no accident that Fox’s highly regarded TV studio chiefs, Walden and Newman, were given oversight of network programming last year after a management shakeup. The fortunes of networks and studios under a single corporate roof are intertwined more than ever before. And the power is shifting to those who produce content — rather than to those who manage the distribution pipes.

To be sure, vertically integrated congloms have been focused on exerting 360-degree control of their programming for years. But in the current environment, ownership has become an imperative, because profits are harder to come by through advertising sales in first-run linear telecasts — the old-fashioned way networks did business. To drive the point home, TV honchos are bracing for an upfront sales market that will likely suffer a drop in total volume of dollars committed to advance buys on broadcast and cable nets for the second year in a row.

“There’s no question that we’re seeing a new advertising reality here, because money definitely has migrated out of traditional media into new media, which is one of the reasons why we’ve shown such an interest in new media,” Disney chairman-CEO Bob Iger told investors on May 5 (although he was quick to praise ABC’s track record this year, and asserted that “the upfront is going to be just fine for our network”).

In a world where viewers are increasingly setting their own schedules, networks no longer can afford to carry the programs that used to be found in lower-profile “hammock slots” on the schedules. To survive, shows have to be buzzy enough (“undeniable” was the watchword among execs) to be sought out by viewers who may only sample them through on-demand platforms. That shifts clout to creatives — hence the reign of “uber producers,” a la Shonda Rhimes, Dick Wolf, Chuck Lorre, J.J. Abrams, Howard Gordon and Greg Berlanti.

As tough as it is to field a new show in this crowded climate, the major congloms are investing more than ever before in original content, particularly in dramas, which travel well around the world.

That’s quite a shift from the heyday of “Friends,” “Seinfeld” and “Home Improvement,” when comedies were the Holy Grail for studios, because even a
reasonably successful sitcom was sure to be wildly profitable in syndication. Today, with half-hours harder to break and dramas generating so much traction, the investment in comedy programming is declining, as is clear from the decrease in half-hour series orders this cycle.

Overall, the broadcast networks are buying more shows, scripted and unscripted; even summer schedules are now stocked with originals. Plus, there’s a gold rush for original programming sought by the same digital and cable nets that have eroded the Big Four’s audience.

Indeed, the original content arms race among Netflix, Amazon and Hulu in the past year has been good for Hollywood, as even A-list talent is flocking to the commercial-free playground of SVOD. ABC Studios is building a Marvel dynasty at Netflix. Warner Bros. TV is producing an animated “Green Eggs and Ham” series for Netflix and a J.J. Abrams-Stephen King collaboration, “11/22/63,” for Hulu. Sony Pictures TV is firing up drama “Mad Dogs” with Shawn Ryan for Amazon and unleashing Baz Luhrmann on “The Get Down” for Netflix.

The growing returns from content licensing have been a big part of CBS Corp.’s strong financial performance over the past few years. Owning successful shows has helped transform the Eye from a company that was largely dependent upon advertising revenue just a few years ago to one that now reaps 49% of its gross from non-advertising sources — chiefly content licensing plus carriage and retransmission consent fees from multichannel video programming distributors. Since content and distribution revenue are much more predictable than income from the cyclical swings of the advertising market, the better balance of revenue sources has greatly improved the Eye’s standing on Wall Street.

From a corporate perspective, CBS sees its network and studio operations as two sides of the same coin. “The network is like the mother who gives birth
to the asset with the studio,” said CBS Corp. chief operating officer Joe Ianniello. “As the asset grows, it becomes more of a studio product, but you’d never know if it would have been successful without the network.”

The CBS Television Studios division produced 30 more hours of programming in the first quarter of this year than it did in the comparable period a year ago. That means an investment of $60 million to $90 million now (assuming an average cost of around $3 million per hour), in the hopes of larger returns over a longer period down the road.

Call it the Lucy Principle: In recent years, CBS has made about $15 million a year on licensing deals for “I Love Lucy,” a show last produced in 1957.

“Ten years ago, there was a lot more risk for us in estimating revenue from our shows,” Ianniello said. “The changing business model and the increase in
international and SVOD gives us much more certainty on what we can expect to make. That gives us a lot of underlying flexibility. Our cost of capital goes down, our stock price goes up. The risk profile has changed.”