I think that there are multiple reasons why this season the ratings are dropping:
1. The level of talent this year is as low as it has ever been. Crystal Bowersox is head and shoulders better than anyone else on the show. Only in season one has the talent pool been so shallow.
2. Last year they added a fourth judge, why? It just took longer to critique each contestant. I also have a sneaking suspicion that they wanted to get rid of Paula because of her sometimes odd behavior. They wanted to see how the public liked Kara before low balling an offer to Paula the following season. Then when it seemed like they got what they wanted when Paula quit they replaced her with a comedian/talk show host that has no music background whatsoever. I don't understand this either.
3. Rumors are that this is Simon's last season. As far as I am concerned, if there is no Simon, there is no show.
4. Lastly, I feel like the judges sometimes try and make the show about them with all of the back and forth banter. I think that some is ok, but I find it unnerving that after they rip someones performance apart, they start joking with each other while doing it. I find it cruel. Dont get me wrong, I laugh when they are mean to those at the original auditions in various cities, but enough is enough.