If cord-cutting weren't enough trouble for media companies, they're now facing pressure from another direction. Last year, TV ad spending decreased for the first time since 2009, and that decline is expected to continue over the next five years, according to estimates from eMarketer.

As more consumers cut the cord and ratings continue to fall for even the most promising live events -- like NFL games -- ad dollars are starting to jump from television to digital. Digital ad spending is expected to climb another 19% this year, according to eMarketer's estimate.

Advertising represents a significant portion of revenue for major media companies like Walt Disney (DIS -3.39%), Twenty-First Century Fox (FOXA), Time Warner (TWX), CBS (PARA 1.73%), and Viacom (NASDAQ: VIA). Constrained by cord-cutting and decreasing ad spend, media companies are looking for new avenues of growth over the next few years. One promising solution is the direct-to-consumer model.

A person lying on a couch holds a tablet playing a video.

Image source: Getty Images.

Going direct-to-consumer

In an effort to combat cord-cutting and the shift of ad dollars to digital, many media companies are working on direct-to-consumer streaming products.

CBS was one of the first media companies to offer a direct-to-consumer service, CBS All Access. Management says it already has about 2.5 million subscribers about three years after launching.

Time Warner has offered HBO Now for some time, but it doesn't show advertisements on that network. The company picked up a 10% stake in Hulu, which is co-owned by Disney, Fox, and NBCUniversal, and is expected to produce over $1 billion in ad revenue this year, up 13% from last year.

Most recently, Time Warner announced the launch of the Bleacher Report Live sports streaming service. The service capitalizes on Time Warner's existing relationship with sports leagues and offers customers the option to pay per game, or even pay for parts of games.

Disney has big plans for a direct-to-consumer offering. It will launch ESPN+ in the coming month, and it has a Disney-branded service set to launch near the end of 2019. Disney's forthcoming acquisition of Fox will make available a huge trove of content for the service and provide greater control over Hulu.

Viacom is planning to launch its own ad-supported streaming service before the end of its fiscal year in September. Viacom generates a majority of its revenue from advertising, unlike most other cable network companies, so the shift to digital is an even bigger threat.

Is there enough room for everyone?

Consumers have been saying for a long time that they want some form of a la carte TV, but the actual offerings may prove to be just as expensive and even more of a mess than the traditional cable bundle. Every major TV network will have a direct-to-consumer streaming service by 2022, The Diffusion Group predicts.

Customers may go without channels they'd watch occasionally if they were in a bundle, but won't pay $5 per month for unlimited access to live-streaming and on-demand content. They'll only pay for content they really want.

That bodes well for Disney, which has tremendous brand strength, but Viacom may find it more of a challenge to win subscribers. That's likely why Viacom is considering an ad-supported version of its service in order to subsidize subscription pricing, if it were to go that route. CBS took a similar approach with All Access, and that's worked well so far.

Risky business

There's an additional risk for media companies going direct-to-consumer. Historically, networks have generated additional revenue by licensing content to other streaming services or other networks for syndication. But in order to increase the value of a direct-to-consumer service, a network needs to retain more content for itself.

That would mean media companies will slowly replace a guaranteed source of revenue with a source of revenue that depends on their capability to sell subscriptions or otherwise monetize that content themselves (with ads, for instance). That could make earnings a lot more volatile for media companies, especially more concentrated companies like Viacom or CBS.