Of the many mediums of storytelling that have emerged in the past century, television has proven to be one of the most resilient and responsive. Now, however, it faces a challenge more insidious than the rise of cable or DVR—the era of online streaming. Embodying this challenge is the long-awaited return of one of TV’s most beloved cult classics, “Arrested Development”, which will begin its fourth season next spring. The return of the show is not itself significant, but how it is returning offers us a window into the radical changes facing television as a medium: after years of negotiations with the show’s parent network FOX, its creators have not managed to reach a deal with them or any other network. The new season will be distributed to the show’s extensive fanbase exclusively through the Nextflix Watch Instantly streaming service.

For many in our generation, this seems a reasonable evolution. The idea of having a broadcast or cable TV connection in the United States seems increasingly obsolete to a generation that grew up with high-speed Internet—and the World Wide Web is capitalizing on this. Shows are now available on-demand through Amazon and iTunes, while Hulu and Netflix provide legal streaming. As the online television environment grows exponentially, it is easy to forget that this phenomenon is wholly new and still a radical challenge to the traditional medium.

Conventional television hasn’t gone anywhere just yet, though. It is worth noting the unparalleled and enduring popularity of television as a medium of storytelling in American culture. In 2011, 114.7 million American households owned TV sets—although this has dropped from its previous high of 116 million. Consequently, viewership through traditional means was down to 284.4 million from a peak of 289.3 million. These numbers are nothing to sneeze at, but it must be noted that the trend is moving downwards. To understand how the nature of television is evolving, it is necessary to examine how distribution has changed in this staggeringly popular medium since its inception.

The history of television can be painted in three broad strokes. In its early days in the 1950s, “television” meant broadcast television, dominated by four national networks. In a slow but radical shift beginning in the 1980s, cable television diversified the market and brought channel-surfing into the lexicon. Where an average household in 1985 received 18.8 channels, by 2000 it received 74.6. The 1990s brought an even deeper shift—the DVR. Consumption no longer depended on the schedule dictated by networks, radically challenging the conventional view of television as a broadcast medium. This change has been so pervasive that Neilsen, the television ratings company, eventually stopped counting the “channels per household” metric in 2008, which then stood at a staggering 130.

While cable and DVR fundamentally changed how television is distributed and consumed, the online era threatens to break down the idea of the medium altogether. In its early days, television networks resisted the Internet. As a result, illegal torrenting networks were flooded with the latest episode of “Survivor” or “Heroes”, and every so often an unsuspecting teenager would be taken to court for downloading the entire back catalog of “Xena the Warrior Princess”. The networks finally acquiesced in the mid-2000s, selling their shows on-demand and eventually streaming them online in two different models advocated by the giants of the field, Hulu and Netflix.

As the medium has changed, the type of content it distributes has also changed. Early television shows were episodic in nature—plots were confined to single episodes in order to maintain an audience even if they missed a couple of episodes. The type of serialized storytelling we are now familiar with emerged as recently as the 1990s, when DVRs meant you could never fall behind on a show. In a more fragmented environment, shows like “Buffy the Vampire Slayer” and “The Sopranos” that spun one plot through whole seasons-worth of episodes became plausible.

In the streaming age, where viewers select content without temporal restrictions, the role of networks as gatekeepers instantly disappears. Serialized storytelling thrives in such an atmosphere. Audience loyalty is directed towards content and the creators who make it, leaving television networks in an existential crisis where their role is to produce but not distribute.

To fill the vacuum, two different distribution models have emerged in online streaming. Hulu was initiated by major networks with the goal of staving off piracy, and now hosts new episodes of ongoing shows, interspersed with ad breaks. Netflix entered the field by adopting a subscription-based model for its service. A relatively cheap buy-in brings access to a back catalog of shows, featuring complete seasons rather than ongoing ones.

In order to preserve the time-sensitive nature of conventional television, the Hulu model primarily monetizes content through advertising. Taking a page from Google’s book, Hulu uses viewing patterns and intermittent surveys to target advertising at its viewer, ideally offering ads for products that you would actually buy. In old-world media, networks would intervene to create shows directed at certain demographics and sell advertising space based on that demographic data. Here, the content does not have to change; rather, the advertising can mold itself around the show and the viewer’s profile. The Netflix model also dispenses with the old-world demographic obsession. Its flat fee buy-in can be distributed to all content, regardless of what shows are viewed by which demographic sub-group.

Beneath the evolving way in which existing content is distributed, there is an even more radical change simmering. Netflix’s exclusive deal to distribute “Arrested Development” is a prime example of this. Hulu has quietly been picking up American distribution rights to British shows and creating a handful of shows of its own. The effectiveness of this is yet to be seen, but it signals a crucial change—content creators now have a means of sidestepping major networks altogether.

For years, “Arrested Development” sought a home on the big screen and the small. It had been canceled—despite a viewership of 4 million—for being unviable on a major network. The now-cult classic sitcom is precisely what Hulu Vice-President Andy Forssell called “content that’s beloved, not beliked,” when describing the ideal Hulu show. It might not reach the standards of major network audience, but it has a dedicated and loyal following, the kind on which the Hulu and Netflix models thrive. Its fourth season will be the first major American show distributed exclusively and entirely through the streaming model. There are interesting implications to this: all ten episodes of the new season will be released on the same day, putting into question whether the time-sensitive model, crucial to old-world television and preserved by Hulu, is even necessary.

Regardless of that answer, it is an exciting time for television, as the ghosts of demographics fade and the diversity of content reaches its apex. The new distribution models offer content creators a more direct way to reach their audience, and give distributors a way to host more shows without losing their revenue stream.

However, the transition is not without its kinks. As production houses are still the main content distributors, many of the plagues of the old model persist. Many cable networks are holding out for fear of losing profit margins. HBO, a network once adored as a challenger to the traditional medium, does not offer a streaming service for non-cable subscribers. It is no coincidence that “Games of Thrones” became the most pirated show in history last year, with 2.5 million torrented downloads per episode and counting. And yet, an inability to find a profitable model keeps HBO straddled between two worlds as it guzzles viewers. Holdouts aside, the transition has one endemic problem—international distribution. Hulu, Netflix, Amazon, and everyone else in the online television business have had to find ways to restrict their content to American consumers alone at the behest of old-medium gatekeepers. One can only hope that as the role of networks fades, geographic barriers will fade with them.

Despite the challenges of the transition and the persistence of some old model conventions, television has begun its most radical shift yet. Change is slow, but it is coming—in 2011, Neilsen found that 1.5 million homes had cut off their subscription to conventional cable television. Hulu showed 1.5 billion ads last year and Netflix has nearly 24 million subscribers. Content and viewer are better linked in the new distribution models, allowing more selection for the viewer and tolerating less pandering to the lowest demographic denominator. As the models of Hulu and Netflix evolve and bring new content entirely on their own, we ought to applaud this increasing fragmentation and welcome a new era of more responsive and diverse television.