Digital transformation of media: key trends till 2022

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Introduction It is difficult to overestimate the influence of the media on current economic and political events. This thesis is true not only for Russia, but also for the global information space. The modern world and progressive society are inextricably linked with the development of high technologies. The presence of a mobile phone at hand and the ability to access information 24 hours a day increased the speed and volume of consumption of services by tens or even hundreds of times. The golden age of consumption has reached incredible proportions. A variety of OTT platforms, a wide range of TV channels and a huge number of news portals form the modern media landscape. The digital transformation of media fundamentally changes consumer habits, the range of services and the amount of available video content, resulting in a new standard and quality of life. The purpose of the study is to identify the key trends that have developed in the media industry in the flesh until 2022. Methodology A comparative analysis of various segments of the media industry is carried out: infrastructure and content, as well as an analysis of the main financial and economic indicators and investment indicators of key enterprises in the industry. The trends in the development of world and Russian media holdings are compared. The study is based on the analysis of information from open sources and professionally oriented conferences, as well as analytical materials from research companies. The object of the study is the media industry based on video, the subject of the study is the trends of the media industry. Results If we consider the entire path of modern digital transformation (DT) from the beginning to the present, then the prerequisites for its development were laid by the Austrian economist J. Schumpeter at the beginning of the 20th century. It was he who defined the concept of “innovation as a key source of economic growth”. In his book “The History of Economic Analysis”1, Schumpeter speaks of the cyclicality generated by the unevenness of the innovation process. In fact, he linked together technological change and entrepreneurship, designating them as the basis of economic growth. Subsequently, Schumpeter supported the theory of cycles, or long waves of N. Kondratiev, and introduced the term “Kondratiev waves” (K-waves) - the relationship between fluctuations in the economy and the technical development of production processes. The idea was that “each rise in the grand cycle is accompanied by deep development in technology, innovation and intensive transformation of industries” (Abalkin, 2002). According to the theory of K-waves, there are currently 6 technological modes with a periodization of 50 years. Later, Kondratiev’s position began to be associated with the idea of technological determinism. The term “technological determinism determinism” was introduced into science by the American sociologist and economist Thorstein Veblen. He and his followers such as Clarence Ayers, William Ogburn believed that technological progress played a key role in the development of the economic, political, historical and socio-cultural aspects of society. This concept is characterized by society’s passage of three stages: pre-industrial (agrarian), industrial (Aron, 2002; Fourastie, 2001) and post-industrial (Bell, 1973; Toffler, 2004; Brzezinski, 1970). The beginning of the digital revolution is associated with the name of Claude Shannon, an American engineer, mathematician, who proposed the use of a binary system for recording and transmitting information, later called “bit”. Any signal could be represented as repeated 0 and 1, which made it possible to transmit information even using imperfect communication channels. In his fundamental scientific work, Daniel Chandler, who was also involved in the study of media theories, collected the points of view and different approaches of many authors and their ideas - philosophical, socio-cultural, historical, economic, 1. 1 Schumpeter, J.A. (1954). The History of Economic Analysis. New York. Oxford University Press. political - and promoted the idea of the “thesis of inevitability and irreversibility” of the development of technologies after their introduction in culture (Chandler, 1995). Despite his criticism of the theory of technological determinism, Chandler defined the role of technological progress in shaping society as leading and “inevitable”. Technological determinism D. Chandler also calls “media determinism”, and defines this theory as “the most popular and influential”, linking society and technology. From the point of view of the modern technological process, it is worth distinguishing between “automation”, “digitalization” and “digital transformation” (Shklyaruk, 2019). “Automation” involves the use of technological tools and machine algorithms to replace routine human labor. This also includes the beginning of the active use of computer technology to maintain the continuity of production tasks (Bertyakov et al., 2021). “Digitization” is the conversion of the main production processes to digital format, for example. E-mail: , the transition of workflow to electronic format, the replacement of a vinyl record or an audio cassette with an mp 3 file, etc. “Digital transformation” (DT) is a fundamental change in production processes and the creation of a new quality of services. It is becoming a necessary and inevitable condition for the survival of companies in a highly competitive environment. Information turns into the main resource, and data into currency. “Digital transformation is based on four breakthrough technologies: cloud computing (cloud computing), big data (big data), internet of things (IoT) and artificial intelligence (artificial intelligence - AI)” (Siebel, 2019). DT promotes: · accelerating the process of globalization; · reduction of time and costs for launching new services (time to market), expansion of markets and distribution channels; · the gradual replacement of products with services. As a result, digital transformation creates access to a qualitatively new standard of living. Stages of development and transformation of media: 1. 1930s - the first stage of media development. Includes print media (newspapers and magazines), radio and television. 2. 1970s - the beginning of the information revolution. The use of computer technology in the production and delivery of traditional media signals has given rise to a new information age (Siebel, 2019). 3. 1980s - the emergence and spread of the Internet as an additional degree of freedom of traditional media. The worldwide global network has expanded the capabilities of traditional media, increased the speed of delivery, which has become key and has led to an increase in media consumption. 4. 1990s - the beginning of the digitalization of traditional media - from cassettes to CDs and DVDs (digitization), the transition to e-mail. . 5. 2010s - the beginning of digital transformation. Media convergence, as a process of integrating traditional and new media, is the beginning of a digital transformation with a change in the methods of content delivery, the active use of 1. cloud technologies. Launch of Netflix video service, a company that has changed the perception of video consumption. Emergence of OTT platforms, new services: catch - up TV, VoD, time - shift. What is happening on a global scale is not a digital revolution, but a digital evolution. There is a planned process of transformation: with mergers and acquisitions, companies leaving the market and the emergence of new ones. “Mobile and personal computers, the Internet and video streaming services such as Netflix, Hulu and Amazon have led to an explosive growth in professional and amateur content and the ‘binge watching’ phenomenon that is changing the world of visual entertainment”. Back in the 1970s, E. Toffler1 called this phenomenon “media demassification” - a term meaning the receipt of information from different, often contradictory, sources instead of one standardized and unified channel. Digital as a way of transmitting data has already taken place. The concept of “digital revolution” has been transformed into “digital evolution”. The change in approaches to the analysis and use of “big data”, denoting such a transition, can be called “data revolution” or stand-alone technologies. Current status and key trends 1. “FAANG” shapes the global media landscape, sets its pace and vector of development. Historically, the leading role in the media market was occupied by large content producers - TV channels, studios - and television operating companies. The transformation of the existing landscape is that it is now shaped by media groups that have grown in the process of consolidation, and large technological giants - Facebook*, Apple, Amazon, Netflix, Google (FAANG) - new players, platforms with their own ecosystems that work directly with viewers. Thus, “technological intermediaries” (Pinchuk, 2021) are relegated to the background and cease to play a key role in the development of the industry. 2. Different evaluation of the production capabilities of companies by the investment market. The bias in the financial market between media groups and technology giants is due to different assessments of their positions and prospects in the investment market. So the AT&T group with revenue of 168,864 bln doll. has a market capitalization of 170,29 bln doll.2 The fall in revenue for the period from 2019 to 2021 was 6.9% (the company’s revenue in 2019 was 181,183 bln doll.). And the valuation of Alphabet (Google) exceeds 1,872 trln. doll., where revenue for 2021 was 258 bln doll., which is a 41% increase, than for the previous period. The growth of the company’s capitalization in the period 2019-2021 exceeded 100% in total3. As a result, companies have different opportunities for access to borrowed capital, the depth of 1. 1 Toffler, E. (2004). The third wave. Moscow: AST publ. * Facebook (Meta) is recognized as extremist in accordance with the legislation of the Russian Federation. 2. 2 AT&T Group. 2022. Companiesmarketcap. Retrieved 27 May 2025 from https://companiesmarketcap.com/att/marketcap 3. 3 Market Capitalization Alphabet. AT&T Group. 2022. Companiesmarketcap. Retrieved 27 May 2025 from https://companiesmarketcap.com/alphabet-google/marketcap/ investment and the scale of projects. At the same time, Google’s main value is in services with minimal investment in infrastructure development, while AT&T, with its large-scale production, spends a great cost item on maintaining the quality of the network. At the same time, the work of Google and its services are based on AT&T’s telecommunications infrastructure. Without broadband Internet access, Google as a platform would not be able to function. 3. The only option for the survival of classical media groups is consolidation, the search for new alliances, and cost optimization. The total amount of the deal “Comcast NBC Universal - Sky” exceeded 40 bln doll.1 Disney acquired 21st Century Fox for 71 bln doll. in 20192. Facebook* has created a unique ecosystem through the acquisition of Instagram** and WhatsApp***. Similar consolidation processes took place in Europe: the BBC**** and iTV, TF1 and M6, etc. Merged their assets WarnerMedia (AT&T) and Discovery into a single media asset Warner Bros Discovery, which will become the largest in the media market3. The transaction amounted to 43 bln doll., the total value of the company will be 130 bln doll., and the total revenue by 2023 will be approximately 52 bln doll.4 As a result, vertically integrated platforms, or ecosystems, that have direct access to their product to the end consumer have appeared. The remaining questions are: to acquire content rights (licensing) or create your own exclusive content, enter into partnerships or go on your own. 4. Big Data, its scale and information about the end consumer becomes a key asset or “oil” of the 21st century. Top 5 companies by market capitalization are: Apple (“I know what kind of music and movies you like”), Microsoft (“I know how you work”), Google (“I know what you are interested in”), Amazon (“I know what you bought and what you plan to buy”) and Facebook* (“I know who you are”). Technological giants have long gone beyond individual states, turning into global monopolies with their own “political” vision and business rules, for which international law has ceased to exist. Therefore, in recent years, more and more calls have been heard from high tribunes to regulate the work of giants, and to review the impact of their norms and rules on social networks and information platforms. 5. Mediators, aggregators and technological “intermediaries” leave the scene. Arbitration or mediation, with its inherent possibility of unethical business behavior - a referral service - has once again shown its inconsistency. In 2000, the market saw a large number of bankruptcies of small telecommunications companies involved in the resale of telephone traffic between Europe, Asia and North America. Currently, 1. 1 Markhuliya, E. (2018). Comcast will spend $40 billion to buy Sky. Is it possible to earn money on this. RBC. 2. 2 Sweney, M. (2019). Disney Tops Hollywood hierarchy closing 21st Century Fox Deal. The Guardian. * Facebook (Meta) is recognized as extremist in accordance with the legislation of the Russian Federation. ** Instagram (Meta) is recognized as extremist in accordance with the legislation of the Russian Federation. *** WhatsApp (Meta) is recognized as extremist in accordance with the legislation of the Russian Federation. **** BBC’ official site is blocked in Russian Federation in accordance with Rorkomnadzor. 3. 3 Koblin, J. (2022). Hollywood Gets a New Giant. The New York Times. 4. 4 Forristal, L. (2022). The Warner Bros. Discovery Deal Has Officially Closed. TechCrunch. all major content companies are launching their own content access platforms. The result is a significant fragmentation of services for the end user: on average, in North America, a consumer spends up to half an hour a day between different platforms searching for content to watch. 6. Preservation of the dominant positions of linear television in the formation of the information agenda. Over the past twenty years, the role of linear television has been called into question several times. Another attempt to reconsider the importance of television broadcasting occurred during quarantine 2020. On the one hand, television acts as an information guarantor against the backdrop of a crisis of confidence and unites viewers at the big screen for joint viewing, on the other hand, the Internet, with its principle “I watch what I want, when I want, where I want and how I want”, is gaining an increasing part of the audience, especially among young people. Despite the fact that the Internet is consolidating more and more advertising revenue, statistics show that TV advertising continues to have a positive increase year to year. Driven by sports, news, and live broadcasts, consumption continues to grow amid a decline in other linear content. Despite all the trends in the popularization of OTT services, practice shows that in the next decade, linear TV, with the right emphasis on tricks and strategies, will maintain and strengthen its positions. It is TV advertising that acts as the main tool in “brand building”. The rest of the educational and entertaining content will be watched by users on paid subscription platforms or working on an advertising model. There are attempts to introduce interactive as a function in a traditional television remote control. We see this trend on tablet devices and touch screen smartphones, which can now act as a remote control. 7. OTT platforms continue to gain popularity. They are created by everyone: from content producers, TV channels to fashion houses. According to analysts, OTT platform revenues will grow to 167 bln doll. by 20251. Already, revenues from paid services from OTT platforms have exceeded revenues from cable TV operators. Video on the Internet in 2022, mainly due to mobile devices, will account for at least 82% of all traffic. About 73% of American TV viewers simultaneously use a smartphone while watching a TV program, of which 71% are looking for information on the TV program they are watching, and about 28% are discussing it on social networks2. The introduction of 5G technology should increase the coverage of OTT platforms. By 2028, about 90% of all traffic will come from video. At the same time, the cost of delivering video content over 5 G networks is an order of magnitude higher than when using DTT technologies. (Germany, DTT costs 0,28 Euro/household per year, 5G will cost 7,32 Euro). It is clear that in the future a reasonable balance between broadcast technologies and mobile networks will be found. The share of video content consumed through OTT platforms is growing and already stands at about 28%, while the share of advertising revenue does not exceed 5%. 8. With a significant increase in the consumption of content on the Internet, the issues of the quality of services provided (including the subscription model) remain 1. 1 Easton, J. (2020). OTT Market to Hit US$167 billion by 2025. Digital TV Europe. 2. 2 Richter, F. (2019). One Screen is Not Enough. Statista. unresolved. A five-second break in the broadcast of the video leads to the loss of at least 12% of the audience. The demands and expectations of the audience are growing. Advertisers are also raising more and more questions about the appropriateness of their videos in a particular video content (brand safety). An analysis of the quality of the release of commercials shows that up to 47% of all commercials do not come out on time, or come out with violations. As a result, there is a tendency to return advertising budgets to linear TV with a clear and transparent mechanism for controlling the release of advertising and the effect of its placement. 9. The growth of video content on mobile devices continues. Of the 7,7 bln population, 3,8 bln. people have access to the Internet, and 3,2 bln people access the Internet from mobile devices. Facebook* social network has 2,9 bln users. The gap is greatest in Asia, with 136 mln fixed broadband Internet subscribers accounting for 938 mln Facebook* users. In Western European countries, the proportion is 145 per 263 mln users of the social network. More than 78% of all video content consumption goes through the screens of smartphones and tablets. Producers are at a crossroads - to shoot and release videos/movies/series in 4k/8k, HDR1, etc. formats or go to the world of small screens. 10. The entry of new players into the market leads to increased competition and increased investment in the creation of new content. In 2019, key media groups spent over 85 bln doll. on content production. If there were about 200 new series produced in the United States back in 2009, then by 2018 this figure exceeded 500 series. But this is just a price to pay for the opportunity to stay on the market and be competitive. For Netflix, the operating break-even point will not come until 2024. Until then, the company will continue to attract loans and shareholder resources. As a result of such a high level of investment in content production, there will inevitably be a risk of digital inflation, which in the future will lead to a new stage of transformation and consolidation of the industry. Russia is certainly a part of the global information space, and our trends are similar. At the same time it has its own peculiarities: 1. Russia is the only country in the world with a national television standard of 20 channels, where both premium sports content (Formula 1, the Olympics, the Champions League), as well as high-rated films and series are available. Public TV channels in the UK are significantly inferior to Russian ones in the quantity and quality of the “paid” content shown on DTT platform. 2. Russia is one of the two countries (the second is China), where the market of social networks and search portals is not dominated by Google, Facebook* and Instagram**. 3. Active development of Russian ecosystems: Sber, Ozon, MTS. By the time the sanctions policy against Russia was aggravated, the landscape of the Russian media market had already been shaped by local players. Market exit of Netflix and a 1. 1 High Dynamic Range - video transmission technology, the brightness range of which is much higher than existing technologies. * Facebook (Meta) is recognized as extremist in accordance with the legislation of the Russian Federation. ** Instagram (Meta) is recognized as extremist in accordance with the legislation of the Russian Federation. number of foreign TV channels such as Disney, the closure of Facebook*, Instagram** and Twitter***** on the one hand, it significantly reduced the amount of advertising inventory on the market, and the departure of large advertisers such as Coca-Cola, McDonald’s significantly reduced the available advertising budgets. On the other hand, all this together balanced each other, and the formed basis of the media industry made it possible to pass the first and most difficult stage of sanctions pressure with minimal losses and without significant shocks. In addition, the market was not allowed to fall by the policy of penalties for refusing to place ads. Currently, the advertising market is recovering based on the increased marketing activities of Russian companies, including ecosystem companies (Polyakov, Sleptsov, 2022). Those market participants who lacked advertising inventory come to television. As a result, there was no drop in the advertising market in March 2022. In April-May, the forecast is 10% below the initial forecast. The most difficult period is expected to be in the summer of 2022.1 Conclusion The theoretical basis of digital transformation was formulated at the beginning of the 20th century with the allocation of the concept of “innovation” by J. Schumpeter and its connection with entrepreneurship, and went through several stages in its development. It is the work with innovations and the development of digital culture that are the determining factors for the success of digital transformation strategies for companies. Media and technology or digital transformation are both concepts, inextricably linked. To date, the following key trends can be identified that shape the modern global media landscape: · global media giants, in particular FAANG, consolidate the industry, form the media market, set the pace and development vector for it; · the investment market paradoxically assesses the production capabilities of companies: the capitalization of service companies is tens or even hundreds of times higher than the market valuation of their infrastructure partners, without which they, as platforms, would not be able to function; · ecosystems are being created, vertically integrated platforms with a full production cycle and final access to the consumer of services, cost optimization is taking place. Traditional media companies, in an attempt not to lose their consumer, are moving from a licensed business model to direct distribution (Disney+) and are forced to compete in the digital space with a number of new players. · “big data” is becoming the “oil” of the 21st century, at the same time, the global demand for regulating the work of media giant companies, their influence, norms and rules on information platforms is growing; 1. 1* Facebook (Meta) is recognized as extremist in accordance with the legislation of the Russian Federation; ** Instagram (Meta) is recognized as extremist in accordance with the legislation of the Russian Federation; ***** Twitter - the messenger is blocked in accordance with the decision of Roskomnadzor of Russian Federation. · technological intermediaries between content producers and end users are becoming a thing of the past; · linear television retains its dominant position in the information agenda, acting as an information guarantor against the backdrop of a crisis of confidence and uniting viewers for joint viewing at the big screen, and TV advertising continues to act as the main tool in “brand building”; · many TV channels have OTT versions that broadcast both through Internet sites and using popular platforms such as Smart TV, Apple TV, Android, etc. TV channel versions are gaining more and more popularity intended for broadcasting on mobile communication devices; · the role of content aggregators is growing - operators of multimedia platforms that individualize the delivery of content to the end user, changing television viewing. A new type of mobile and interactive consumption of various thematic content from many screens is being formed, changing the shares of linear and non-linear television consumption; · new players enter the media market, which leads to increased competition and increased investment in content production. As a result, there is a risk of digital inflation, which in the future may lead to a new stage of transformation and consolidation of the industry. The trends in the development of the media industry outlined in the article confirm the author’s main hypothesis about the inevitability of the redistribution of cash flows due to the formation of a contradiction between the production and consumption of content. The development of technologies, telecommunications channels, the creation of new platforms significantly changes the classically established chain of interaction, namely, the content producer - channel - distribution environment - consumer. The content producer interact directly with the consumer. The current disproportion in the distribution of profits in the near future will lead to a significant reform of the industry. Without high-quality content and a reliable telecommunications infrastructure, new platforms cannot exist and develop.

About the authors

Elena S. Pinchuk

RUDN University

Author for correspondence.
Email: elena@pinchuk.me
ORCID iD: 0000-0002-7940-3720
SPIN-code: 7065-1469

applicant for the degree of Candidate of Economic Science, of the International economic relations Department, Faculty of Economics

6 Miklukho-Maklaya st., Moscow, 117198, Russian Federation

References

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