Two forces, working in grudging symbiosis, control the media: content producers and content distributors. If information travels along a highway, then the distributors own the road, and the providers make the stuff that rides on it. Neither has value without the other. But control both the road and its travelers, and a company might master its own destiny. That was the theory, at least, in the 1990s, when TCI CEO John Malone’s “converging alliances” ruled the day and the Baby Bells — the remnants of AT&T’s breakup — merged like mad. Telecom execs known as “infobahn warriors” formed unlikely alliances for the sole purpose of controlling that highway and its travelers. Then the Internet happened.
Information no longer travels on a metaphorical road but through a very real series of tubes, delivered not simply to TVs but to phones, tablets, computers, and videogame consoles. Media can be consumed in more ways than ever before, but the delivery system is startlingly homogeneous: It’s the Internet. One company, Aereo, even picks up broadcast signals using a bay of rabbit-ear antennas and then moves that data through the Internet. The way information is distributed is so similar that content is now the market differentiator. A hit show or a sports broadcast is leverage when providers negotiate with distributors.
Consider ESPN, arguably the most valuable media brand in America (estimated worth: between $40 billion and $60 billion) and the rocket propellant driving Disney’s growth. Its cable channels collect $5 and up from some 100 million households; its digital audience (that is, purely via the Internet) averages 800,000 viewers during Sunday football, when ESPN isn’t even airing the game. How you watch ESPN — on your laptop, phone, or television — is not nearly as important as the fact that you are watching, one way or another.
Viewers are faster moving than media companies, and have proved incredibly disloyal to the most seemingly entrenched platforms — even television. In 2009 the Kaiser Family Foundation found that 8- to 18-year-olds were spending less time in front of a TV — the first decrease in viewing since its study of youth TV habits began in the 1990s. The report pointed out that children weren’t watching less television; they just weren’t using a traditional set-top box. Instead of huddling in front of a glowing screen in the family living room, they were streaming their favorite show on Netflix, commercial-free. Nielsen’s findings are starker still: Traditional TV viewing by 18- to 24-year-olds has dropped for six consecutive quarters, and teens (12- to 17-year-olds) watched the least traditional TV among every age group surveyed.
In the teens’ case it is pretty clear where they are going, and where things are headed: YouTube. The Google-owned company has supplanted Viacom-owned MTV as the go-to destination for music and pop culture ephemera (cellphone videos, for example), much of it user-generated and all of it free. But an abundance of free videos is a double-edged sword if none of it is exclusive, so YouTube is spending $350 million on original programming for its online video channels. Amazon also launched Amazon Studios and partnered with Warner Bros. for a similar purpose — original content delivered on demand through its website or its Kindle devices. The model is extremely low cost, comparatively (the Writers Guild of America minimum for a 30-minute show on broadcast is more than $20,000 an episode): If an entire show is green-lighted its writer receives $10,000; if it is distributed the creator gets $55,000. Google and Amazon are Internet-born behemoths, with market capitalizations that dwarf most (see chart), and they are dipping a toe into the media pool. What might happen if they choose to dive in?
After two decades of relentless mergers, spinoffs, startups, splits, and movement to the tubes that now make up the information highway, one thing is clear: Content may not yet be king, but it is ascendant.
This story is from the October 28, 2013 issue of Fortune.