While piracy is a major problem in mainland China's music market, consumers in that territory are in fact spending serious money on music, according to William Bao Bean, partner in Hong Kong-based venture-capital firm Softbank China and India Holdings.

The country's consumers spent $1.5 billion on music in 2006, but the figure could have been higher, Bean told delegates at the Music Matters conference's opening day today in Hong Kong.

"The issue that you should be focused on is that the publishers and record companies captured only about 4.5% of that $1.5 billion," noted Bean, speaking at the "State of the Union" presentation.

The problem, Bean says, is "slippage," or underreporting of revenues by telco carriers, and network transmission fees.

"Content providers are now looking for alternative channels other than telco carriers," Bean said.