We’re watching more TV than ever. I’ve written it before, but for all the fuss about online video, Netflix, and how our viewing habits are changing, the market for TV ads is an undisrupted $78 billion behemoth, eclipsing the one for online video ads more than 15 times over.

That’s not to say that all is dandy for TV executives. But going off Nielsen’s State of the Media report on Advertising & Audiences released today, the biggest competition for television is television. The only force that seems to be upending the market for TV ads is the massive fragmentation of the audience.

Across the country, there are 318 million televisions and 243 million Internet-connected computers. The TV long ago reached its saturation point and the computer is close behind it. But the average American spends 175 hours each month with their TV, compared to just 18 hours combined with Netflix and Hulu. Despite the connected set-top box hype, across the entire nation penetration is so low that use averages out at just a little over an hour per person.

TV advertising is growing at a diminishing but still unhindered rate: 2.6 percent in 2013, down from 7.8 percent in 2010. But when you look at the drastic cratering happening in other parts of the formerly traditional advertising market, it's difficult to consider that TV ads have peaked. Of course that hasn't stopped some from doing exactly that.

The pain point for advertisers, the needle in the haystack of figures in today’s Nielsen report, is that last year there were 189 possible channels at our disposal. In 2008, there was only 129. Despite this, the amount of channels the average person tunes into has remained static at 17. We have a fixed amount of brain space to fit into our TV roster and 50 percent more channels to choose from: Starz, FXX, Revolt TV, Pivot, the El Rey Network…

Audiences also don’t all watch the same things anymore. In 1983, 125 million people watched the series finale of "M*A*S*H," and in 2004, 52 million watched the finale of "Friends." Come 2014, just 12.9 million watched the end of "How I Met Your Mother."

On Sunday nights ten years ago, shows like Law & Order and Crossing Jordan cleared 20 million people. Last night, for the network the big hits were The Good Wife with 8.68 million viewers and the Amazing Race with 7.44 million. The audience has been lost to other parts: eight million to HBO for Game of Thrones, another three to AMC for Mad Men.

Another issue is that there’s nowhere near the same population density in the TV listings anymore. Supply and demand are growing, but supply is growing much faster. Understandably, according to Nielsen, the average price of a 30-second ad spot on broadcast and cable has fallen from $8,900 to $7,800 in the past five years. To compensate, more ads are being crammed in, but that likely only compounds the drop. Between 2009 and 2013 both networks and cable added an extra minute of ads into each hour of programming. Ads are getting shorter too: the number of 15 second ad spots has slowly crept up every year since 2000.

What this splintering has changed, is that quality of audience and demographic have begun to rival size of audience in raw importance. A show like Nashville can get to a third season in spite of ratings that would’ve looked apocalyptic 10 years ago because it brings in more women between the age of 18-49 (e.g. catnip for advertisers) than any other show on at 10 p.m. on Wednesday.

But this isn’t a peak for TV advertising. The drop-off in money for each advertising slot is more about internal than external forces. It’s likely that a contraction in the amount of available channels is coming, especially given how the 60 new channels added in the last five years have only split the pie further rather than growing it out. (You could argue that there aren't too many hours of the day we can devote to TV now.) As this happens, other networks can reclaim their share and feel more confident hiking the price.

Imagine if the hardest problem facing newspapers was that too many newspapers had opened up? You can't. It says something for how much Americans love TV that this far into the new media revolution, its biggest point of competition is itself.

[illustration by Brad Jonas for Pando]