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For traditional TV, it’s the best of times, it’s the worst of times

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The TV business is changing rapidly in the face of online video, cord-cutting, the growing use of connected devices for viewing, and legal challenges from the likes of Aereo and Dish Network. But whether it’s getting better or worse for those in the business depends on whom you ask.

According to Time Warner CEO Jeff Bewkes, there has never been a better time for traditional TV producers and distributors. “Usage is up, programming budgets are up, profits and global demand for everything we make for the TV screen is up dramatically,” Bewkes declared at the FT Digital Media Conference in London last week. “The people of the world love television and the amount and quality of television production is taking off all over the planet. All the best stuff is being made for television now.”

Rather than being threatened by on-demand, over-the-top delivery, traditional TV producers are simply colonizing the internet and making it their own, according to Bewkes.

“When the 20, 30 and 50-year olds are used to getting every show they want from every network on-demand, whenever they want it, that is a huge change,” he said. “That is TV taking over the Internet. We are not seeing the Internet disintermediate TV; this is TV disintermediating the Internet.”

Not according to Google chairman Eric Schmidt. At YouTube’s splashy event in New York this week during “NewFronts” week, when digital video platforms pitched advertisers and media buyers for a slice of TV ad budgets, Schmidt insisted that the battle between traditional TV and the internet is already over — and the internet won.

Asked for his prediction for when online video would displace traditional TV viewing, Schmidt declared, “That’s already happened.” Online video is “not a replacement for something that we know,” he added. “It’s a new thing that we have to think about, to program, to curate and build new platforms.”

While it’s hardly the first time Google and a traditional media company have disagreed on the current state of play, in this case Schmidt can call on corroborating witnesses.

In a note to clients this week, Nomura Securities analyst Michael Nathanson said the traditional TV networks are in bad shape and getting worse, largely as a result of increased DVR use and on-demand video.

“The first-quarter broadcast ratings, under any metric, were ugly,” Nathanson wrote. Total prime-time ratings fell 8 percent during the quarter, marking the sixth straight quarter of declines and the steepest drop since the third quarter of 2009. NBC was off 40 percent compared to last year, when it had the Super Bowl. Fox was down 19 percent, and ABC was down 6.2 percent. CBS was alone in posting an 8 percent gain, largely thanks to having the Super Bowl this year. Without that, it too would have seen a decline. Cable networks fared somewhat better but also saw declines in the quarter.

Yet for all that, CBS managed to report its most profitable quarter ever, and it expects to parlay its strong results into significant gains in next week’s Upfronts, when the traditional networks get their crack at ad buyers.

“We are going to enter this year’s upfront marketplace in a very enviable position,” CEO Les Moonves said on a conference call with analysts, predicting ad sales gains in the “high single-digit to low double-digit” range.

What’s going on? Why the apparent disconnect between theory and actual results?

Viewing habits are changing, inexorably. Insofar as the networks’ business model remains premised on traditional linear TV viewing, they are vulnerable to disruption. But vulnerable doesn’t necessarily mean doomed.

For certain types of programming, such as live sports and news, live, linear access actually adds value because of the immediacy of the content. While live streaming is becoming an essential component of broadcasting such content, the staggering costs of live-sports licensing fees will keep the traditional networks in the game (as it were) because few startups will be in a position to outbid them for those rights.

If all else fails, scale and resources also allow the traditional media companies to buy their way into the new TV economy, as hinted at this week when DreamWorks agreed to pay $33 million to acquire the YouTube channel AwesomenessTV.

Consumers are driving massive changes in the TV business. But who the winners and losers will be as a result of those changes is still very much up for grabs.