Last week, global information and measurement company Nielsen came out with Q1 2015's Total Audience Report. For those following the media landscape, the report gives powerful insight into how content is being consumed across a host of devices: television, radio, PCs, smartphones, and tablets.
And there is a shift going on: no doubt about it. The trend should terrify television broadcasters and cable providers. Demand for television is falling as consumers, especially millennials, are increasingly choosing to consume content from other sources. Here are a few of Nielsen's key takeaways.
Traditional TV viewing is falling in both total time and market share
While it still commands the largest share of leisure time for adults 18 and above, traditional TV (a term that includes both live and on-demand viewing) appears to have peaked in terms of total viewing time and total market share.
In the first quarter of 2013, adults 18 and older watched an average of 5 hours and 40 minutes of television per day, climbing slightly to 5:44 in 2014's first quarter. In the recently reported first quarter of 2015, that fell to 5:30, with live television providing the totality of the drop in viewing. And while 14 minutes doesn't seem like a large drop, remember that this refers to the total U.S. adult population, where one fewer minute of viewing can be worth millions in lost advertising dollars.
It isn't that Americans are consuming less content, however. It's just that they are using new services to do so. According to Nielsen's data, Americans are spending more time on the various platforms it tracks than ever before.
All of the growth is coming from other sources, primarily smartphones, which have grown from average daily use of 58 minutes in Q1 2013 to 1 hour and 27 minutes in Q1 2015. Total usage time across all platforms grew from 10:50 in 2013 to 11:20 in 2015, pulling down traditional TV viewing from 52.3% of usage in Q1 2013 to 48.5% last quarter.
Speaking of millennials ...
In perhaps a more prescient and ominous sign for television studios, it appears that youth is leading the charge away from television. On a weekly basis, adults ages 18-34 spend an average of 21 hours and 55 minutes watching television, with an additional 18:40 coming from Internet-based media: PCs, smartphones, and tablets.
Adults over age 50 -- with perhaps more free time on their hands -- watch a mind-boggling 47:24 of television per week, dominating the 12:26 they spend on Internet-based consumption.
Demographically, advertisers pay more for younger audiences, which may be a reason why advertisers have recently been shifting their ad spend to Internet-based options. For television broadcasters and content providers desperate for ad-based revenue, the double-whammy of falling viewership, alongside a less-profitable viewer base, could pressure financial results going forward. An even more worrisome scenario would be if Internet-literate millennials continue these viewing habits and are a canary in the coal mine for future adults.
And while it's important to note that these aren't necessarily mutually exclusive options for content providers -- for example, a viewer can be watching DISH Network's Sling TV on a PC, Hulu Plus on a tablet, or clips of shows on a smartphone -- the most lucrative business model for the industry has been pay television.
Television channels probably won't like this report
That said, you can bet broadcasters won't like this new report from Nielsen highlighting the limits of their product. CNBC and Viacom have already taken steps to limit the effect of Nielsen's ratings on their ad revenue, according to The Wall Street Journal.
CNBC went as far as to stop using Nielsen, and Viacom is now reporting its financial statements in terms of Nielsen-dependent versus non-Nielsen-dependent ad revenue. Viacom CEO Philippe Dauman has been vocal in his charges that Nielsen has "not caught up to the marketplace."
More recently, however, Nielsen CEO Mitch Barns responded to the critics by saying that Nielsen is being used as a "scapegoat" and mentioned lower-quality programming as a potential reason for lower ratings.
What if Barns and Dauman are both incorrect in their statements? What if falling ratings actually portend a secular shift in the industry?
Jamal Carnette has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.