What you need to know about what could become the world’s biggest radio market 

Barry Keohane is an award winning Australian Content Director and international radio consultant who worked in China for the last 3 years consulting to Adrep China Advertising Pty Ltd – a sales representation company, and owner of the MYFM China radio brand. 
 
Barry has recently returned to Australia, and provides an indepth insight into the Chinese radio market, and what the future of radio looks like for this communist superpower.
 

Over the past decade, China has become the second biggest economy in the world and one of Australia’s leading trading partners. Economic growth has surpassed most western economies, and it’s now a bigger player in the league of world super powers.   With this growth, the Chinese middle class has become richer.  At the launch of his new casino in Manila last week, James Packer admitted he wanted to attract the Chinese middle class to his new casino, saying “the rise of the (Chinese) middle class is as big as the rise of the internet.”
 
And advertisers are getting excited.
 
But when it comes to radio, China is well behind the rest of the world.   
 
Radio has historically been used as a propaganda tool by the government, and as such has never had great penetration with the population.   It’s said that only about 60% of Chinese households actually have a radio (where in Australia it is as high as 97%).  Now, with the rise of the middle class, the increase in vehicle sales and in car listening, and the work being done by international radio experts, radio in China is starting to evolve and become more relevant to listeners. 
 
Big Brother is watching…and listening
 
As you would expect from a communist country, the government controls TV and radio licenses in China, and programs are monitored closely and sometimes censored.  In some cities, announcers have to provide a summary, or even scripts, of what they will say before they go to air to ensure they work within the rules.  This makes it difficult for announcers to change plans, drop content for better ideas, or just basically be themselves.
 
When licenses are issued, the government tells the licensee what content they need to broadcast.  If you’re lucky, you’ll be given a license to broadcast traffic information or music (the most popular and most profitable).  Other licenses are issued for:
 

• Travel and tourism radio
• News radio
• Science and Technology
• Auto, and
• Education

 
Stations have to ensure they provide enough content to satisfy their license, and to keep the government happy.  For example, a station with a “tourism and travel” license can play music, provided they offer content on travel and tourism.
 
 
Show me the money!
 
With the rise of the middle class over the last 10 years, advertisers are now eager to tap into this increase in disposable income.  To maximise revenue, stations (governments) are now employing private advertising representation companies to sell their advertising while they continue to control the content.  Companies like “Adrep China” (which I consulted to) and “YuanYu Radio” are the two biggest operating in mainland China.  However, more and more representation companies are emerging.
 
It sounds like a great plan, but it does put enormous pressure on these companies to make as much money as possible, not just to cover the commission paid to the stations, but also to show a healthy profit.  Most of these agreements are for a limited time (eg. 5, 10 years), and at the end of this period the sales representation may be given to another company.
 
Let me share a few interesting points about radio advertising in China:

• The government caps radio advertising at a maximum of 12 minutes per hour.  However, some stations ignore this and go as high as 45 minutes per hour.  Adrep sticks to a maximum of 12 minutes.
• Advertising is sold as peak time and non-peak time.  With the rise of in car listening, and almost non existent at work listening, this creates huge demand in breakfast and afternoon drive
• Local clients want more spots for their money, so they will buy 15 second commercials as opposed to 30 seconds.  In a 4 minute commercial break, this means listeners are subjected to 16 different client messages
• There is limited creativity in local client spots.  They tend to go with a wordy 15 second retail spot, with their name and phone number (twice) at the end
• Every station in China sells time checks at the top (and some at the half hour).  Eg.  “It’s 1 o’clock, and don’t forget Bunnings Warehouse are open this weekend, with deck chairs….etc”.
• 4A (National) clients buy based on research, and tend to buy the top 3 stations in each market.
• Because the middle class are buying property and cars, in some stations real estate clients and car dealers make up almost 60% of the advertising revenue.  Other big sectors include banking and insurance.
• The big advertising markets in China are the Tier 1 cities – Beijing, Shanghai, Guangzhou and Shenzhen. 

 
Advertisers (especially the 4A companies) are excited by the growth in radio advertising, which is expected to grow 3% each year until 2018, and radio stations are fighting for their budgets.  It’s a buyers market, and with the fact sales rep companies are focused on short-term revenue, clients can dictate what they get for their money.
 
Unfortunately this means sales is given priority over content and programming.
A great example is I once had a station manager ask me to approve a 10 minute commercial (infomercial) for a client.  10 minutes! He tried his best to convince me by saying it was good money, but in the end he could see the damage this would do to the program – plus set a bad precedent. Companies like Adrep and YuanYu are trying to change this by employing foreign consultants to help develop content and educate staff and clients, and help offer better client integration ideas and solutions.  It’s a slow and demanding process to try and change behavior, especially when clients are calling the shots.
 
Content Development
 
Schools and universities in China are fairly strict in the way they teach students.  Students are told how to behave, and not to question anything they are taught.  By the time they graduate from their broadcasting or hosting courses and come to radio stations, they are like robots who have been programmed how to talk on-air, and more importantly what to say.  It’s very hard to work with talent when they are so scared to be themselves and try new ideas.
 
Sales has been a priority for so long for many stations, and therefore the quality of content has slipped.  Stations play un-tested songs from libraries in excess of 3000 titles; the announcers believe that longer talk breaks are better; it’s ok to talk over songs; it’s also OK to fade out a song half way through to ensure you hit the top of hour mark, and more importantly play the time check; and again because of strong client demands, stations will sell-in sponsored contests every hour (if possible).  In some markets, it sounds like one big commercial, interrupted by portions of songs.
 
But the pendulum is slowing swinging back towards better content. 
 
Adrep is one of the first companies to employ foreign experts to consult on content and programming.  The major obstacle is convincing local sales managers that getting the product right, and providing entertaining content to listeners, will lead to sustained revenue in the future. 
 
As I mentioned at the start, radio in China is well behind the rest of the world.  Most of my time in China was spent giving the necessary tools for people to create great radio, and the knowledge and skills to break away from “how it’s always been done.” This included:
 

• Organising and conducting perceptual and music research in all Adrep markets
• Teaching the design and use of strong RCS clocks and scheduling
• Working with breakfast talent on content and ideas that will make then stand out above their competition
• Teaching program directors the important skills needed to lead a team, including air checking, monitoring and time management
• Designing and executing strong promotional ideas for clients, that benefit both the client and the station
• Designing marketing campaigns to focus on one clear message that does not simply target clients
• Instructing staff how to use and get the most out of social media, and
• Talking to station (government) leaders at an industry level about format radio, how it works and also share success stories from around the world

 
Radio in China is too client focused, and needs to move towards being more listener focused – or at least achieve some sort of balance.  Adrep, and now other companies like YuanYu, are slowly achieving this, with other stations and companies in China paying attention.
 
Who is listening?
 
With so much government control, basic or no content, and too many commercial messages in some markets, who is actually listening to radio in China?
 
The answer?  Drivers.
 
Most of the major cities in China have audience measurement.  Until several years ago, AC Nielsen used to conduct most of the radio research.  They moved out of radio, and the research was then taken over by CSM.  In many markets, CSM provides weekly radio audience measurement – but it does have its problems.
 
I used the research we received as a guide, and trusted more on what I heard coming from the speakers (like any good content director).  The reason was that CSM data was based around a sample size of 300 for markets in excess of 4 million people.  It’s just not reliable.  Such a small sample size results in major fluctuations from week to week.  We compensated by looking at the average 5 weekly results, and then analyzing the trends of this 5 weekly average.  Not perfect, but it was the only research we had.
 
What we do know is that in car listening was enormous, and workday listening was very low.  Again it all goes back to the middle class, and the fact they’re all buying new cars.  In Beijing alone, there is an additional 200,000 cars on the road each year.  More cars on the road leads to more traffic, longer commute times, and increased listening.
 
In contrast, workday listening was very poor compared to a market like Australia.  In Guangzhou (population 16+ million), research shows that 30% of people were not allowed to listen to radio at work. 
 
But things are changing.
 
With the advance of technology, more and more Chinese are listening to their favourite radio stations through mobile phones and mobile APPS.  There are some model phones in China that have a built in FM receiver, which means radio is now reaching more and more people.

 
What’s next?
 
China is gradually opening it’s doors to more and more foreign experts, and if companies like Adrep and YuanYu continue to grow each year, and continue to employ foreign experts as consultants, the content will improve. 
 
But change also has to happen at an industry level.  All radio stations need to understand they are there for the listeners first, then advertisers.  More investment is needed to ensure stations are providing better content for the audience, and better solutions to clients.
 
Adrep continues to invest in foreign consultants to help teach and train staff in delivering better content.  YuanYu and other companies are also looking to expand their content development.  Digital and new media will also play a huge part in the next chapter for radio in China, with YuanYu already indicating they will focus more on new media.  More smartphones are sold in China each year than anywhere in the world, and radio stations need to ensure they are both accessible and interactive through mobile technology.
 
With the continued growth and investment in international ideas, Australia is likely to continue to play a role in the development of better radio in China.  It’s great to see so many Australian content specialists taking their expertise overseas.  It just proves that Australia is one of the leading countries when it comes to building and maintaining successful international radio partnerships.

Barry Keohane is an award winning Australian Content Director and international radio consultant, who writes for radioinfo.com.au and AsiaRadioToday.com.