downspout still has water coming out

when i turn the shower knob to have water flow out of the shower, there is still a quite a bit of water coming out of the downspout. does anyone know what's going on here? i would say about 2/3 of the water goes to the shower head and the rest keeps pouring down to the downspout.

Pretty obviously the diverter valve is leaking. If you could post a picture of the valve, the pros here could probably give you some advice on how to fix it.

It depends on the brand and model.
With some of the old Price Pfister three handle tub valves, there was a large loose washer on the stem that help seal and prevent water from going out the tub spout.

Sure enough there was a washer that was broken. home depot didn't have a washer so i bought the whole diverter unit. however, i changed the whole unit out and now there's another problem. when i try to turning the water, it is leaking from the shower knob. when i turn the knob so the water comes out of the shower head, the leak is gone. the only time water comes out of the shower knob is when i turn the shower off. any issues with this?

Adjust the packing nut!