Small music venues fight to keep prices affordable as inflation eats into profits

It has never been easy for small or independent music venues to turn a profit. Now, with inflated operating costs, some owners are struggling to keep ticket prices affordable for audiences and take chances on lesser-known artists.

The past year has seen music fans roaring back to large stadiums to see sold-out shows for icons such as Beyoncé or Taylor Swift, even as consumers cut down on spending for leisure activities. But many smaller, independent venues have yet to see business return to pre-pandemic levels, according to Stephen Parker, executive director of the National Independent Venue Association.

"If you are a larger venue, you're probably doing quite well post-pandemic," he said. "But if you were a smaller venue, you are seeing business, and you're keeping your head above water, but you're also seeing that many of the things that larger organizations have at their disposal, which is economies of scale, is becoming harder."

NIVA was founded in 2020 as a means to lobby for government relief while venues struggled to stay open through Covid lockdowns. It was a driving force behind $16 billion in federal aid to the industry and now focuses its efforts on other issues such as price gouging in the resell market.

The latest challenge facing NIVA's network of independent venues, Parker said, is protecting margins in the face of higher costs.

First Avenue Productions, which operates several venues around Minnesota's Twin Cities, has seen operating costs increase nearly 30% since before the Covid-19 pandemic, with everything from beer to ice to insurance becoming pricier, according to owner Dayna Frank.

"We don't have corporate backstops, we have limited resources," said Frank, a founding member of NIVA and former board president. "Most folks are, you know, owner, operator, floor sweeper, booker, marketer, light bulb changer, everything."

Paul Rizzo, owner of New York City's historic club The Bitter End, said that while food and "every other cost" has increased, he has seen consumers spending less in general.

Part of that is a broad pullback as American tighten their wallets, he said. But it also fits a trend cited by some venue owners of younger generations of music fans drinking less than their older counterparts.

Some owners suggested the legalization of marijuana in many markets may be eating into bar sales — a significant portion of revenue for music venues.

For Alisha Edmonson and Joe Lapan, co-owners of Songbyrd Music House, a 250 people capacity venue in Washington, D.C., it's an ongoing challenge to price concessions in an atmosphere where raw costs are rising and consumers are spending less.

Lapan said many fans expect higher-priced drinks at larger venues and stadiums but don't have the same expectations at small venues.

"There's this idea that you're going to a small venue and it should be like your small local bar, but that's not the economics of a venue," Edmonson said. "We're providing this extra service that we have to find a way to pay for."

It all contributes to what NIVA Board President Andre Perry describes as a "very difficult balancing act" to run a successful small venue.

Owners must figure out how to market different acts every night, decide whether to take risks on newer performers, as well as continually adapt to their community as the economic landscape inevitably changes, said Perry, who has worked in live music for 20 years and now serves as the director of the Hancher Auditorium, a performing arts theater at the University of Iowa.

Unlike some small businesses, venue owners are not selling the same thing every day, Perry said.

"You're taking a cultural practice and pushing it into the marketplace, and I think there's some tension there. Doesn't mean it's bad or that it's broken, it's just, we got to really work hard to make it sustainable for all the people involved."

Many owners of small venues are in the business for the love of music and community, not necessarily to make a lot of money, said Cat Henry, executive director of the Live Music Society.

Henry's organization serves venues of under 300 capacity by providing grants to start new programs or take chances on newer artists that won't necessarily draw crowds.

"I hope that at the state level, at the private foundation level, it will be recognized that this is not necessarily a commercial model, that there are supports that need to be put in place in order for something that is a huge part of American culture," Henry said. 

Don't miss these stories from CNBC PRO: