NEW YORK (TheStreet) -- Content may be king, but sometimes there's just too much of it.
Among the many problems confronting the largest U.S. television networks, one appears to be of its own making: Big Media is producing more original programming than anyone has time to watch. The trend of producing more programming comes as viewers, especially younger viewers, are spending more of their time at user-generated venues such as Google's (GOOG) YouTube and IAC Interactive's (IACI) Vimeo, and subscription video services, especially Netflix (NFLX) but also Amazon (AMZN) Prime, all accessible through devices such as Roku and Apple's (AAPL) AppleTV.
TV content is growing at a rate of 12% a year, while the time that the average U.S. viewer watches television is increasing by just 2%, according to a Barclays research report on U.S. media by Kannan Venkateshwar. Time Warner (TWX) , to cite just one example, is doubling its spending on original programming at TNT and TBS over the next four years from $500 million to $1 billion.
The result is a decline in TV ratings amid increasing signs advertisers are skimming more of their TV money into digital.
"This crowding is likely to result in cannibalization across the platform that gets the most viewership today, i.e., TV," wrote Venkateshwar. "Consequently, if digital advertising continues to grow at the same pace that has been seen over the last decade, then the segment that could suffer next could be TV."
When Disney (DIS) , CBS (CBS) , Time Warner and 21st Century Fox (FOXA) report third-quarter earnings this week, and answer Wall Street analyst questions about advertising trends for the current quarter, we'll get a better sense of how quickly advertising dollars are moving away from television.
Early indications point toward a decline. According to data compiled by Standard Media Index, an industry monitor, third-quarter television advertising fell 4% for the three-month period ended Sept. 30. Considering that the decline in the second quarter was 1%, the television industry may be at an historic crossroads as forecasters such as Forrester Research project U.S. spending on Internet display ads to almost double over the next five years to $37.6 billion by 2019 compared to $19.8 billion in 2014.
It may be unlikely for TV advertising to drop as fast newspaper ad revenue did over the past 10 years, but its still unclear just how fast this process is evolving.
"The decline in ad-supported viewing is happening right at the moment in time when increased TV-advertising substitutes are growing on the Internet," wrote BernsteinResearch media analyst Todd Juenger in an Oct. 23 report. "Not a newspaper-like cliff event, but possibly a long slow melt of slower TV ad revenue growth (in the U.S.) than we had previously believed."
And ratings have been underwhelming. NBC viewership among adults 18 to 49 has declined 6% from last season, Fox ratings are down 19% and ABC ratings are flat, according to Nielsen TV Ratings data for the 2014 to 2015 season. CBS was the only major network to show an increase from last season in this demographic, with viewership up 4%.
The trend is being exacerbated by the increase in total television programming, as programmers search for the next Breaking Bad blockbuster.
The crowded landscape for viewing doesn't help the situation. Monday nights are one of the most brutal. Comcast's (CMCSA) NBC, Disney's (ABC) , CBS and ESPN are all airing some of their highest rated programming -- forcing viewers to choose among the likes of Modern Family, The Voice and CBS's new drama Scorpion.
Despite some new hit shows How to Get Away with Murder, Gotham and Scorpion, this year's broadcast season is off to a weak start. Year-over-year growth in live and same-day ratings has been worse for nearly all cable network groups in the third quarter than it has been for the past five years, according to Nielsen Media Research.
Back in the spring, media executive led by CBS CEO Leslie Moonves and NBC/Universal CEO Steve Burke explained the lower-than-usual spending on upfront advertising -- where networks lock in advertising for their fall seasons -- as a choice by marketers to retain flexibility. Upfront market for sales declined 6% from last year to $9.6 billion, according to the Cabletelevision Advertising Bureau, a cable industry trade group. Nonetheless, Moonves insisted that ad spending was "fine," and that marketers would return to the broadcasters in the fall.
Well, the fall is here, and as the country's largest media companies reveal their third-quarters numbers, investors should get more of an idea just how fast viewers and advertisers are moving to digital -- and away from TV.
-- Written by Antonia Massa in New York
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