Is Nashville's live music scene oversaturated?

Nate Rau | USA TODAY NETWORK - Tennessee

Show Caption Hide Caption Exit/IN turns 45 Owners Chris Cobb and Josh Billue takes us through 45 years of rich history at Exit/In.

Owners of Exit/In and Marathon Music Works recently rejected offer to sell to Live Nation.

In the past 18 months, Live Nation has taken control of two outdoor amphitheaters along with Municipal Auditorium.

“The magic question: Are we moving towards oversaturation in the venue and live music space in Nashville?”

Chris Cobb left a life-changing amount of money on the table when he decided at the 11th hour not to sell his two rock clubs to Live Nation in January.

After nearly a year of sometimes intense negotiations, Cobb and his partner, Josh Billue, had an offer to sell Exit/In, Marathon Music Works and their two attached bar businesses. For Cobb, the deal would have meant a new house, private school for his son and, at 36 years old, finally starting a retirement account.

The deal was imminent, with a letter of intent ready to be signed. Lawyers and accountants were standing by to finalize the sale. And then, while walking his dog one day, Cobb thought back to 2002 when he was a recent college graduate stapling posters to telephone poles in hopes of drawing 30 people to a concert featuring local rock bands.

“I just had a couple of days of thinking, ‘I wasn’t putting those posters up to make money,’ ” Cobb said. “I never did any of this to make money. I still don’t. I just like it. I like what I do, I have fun, I enjoy it, I love the music. That’s how it went from the posters to (the lucrative offer). And when I realized that, I decided I didn’t want to sell.”

Live Nation's failed bid to buy Cobb and Billue’s company provides a snapshot of Nashville’s live music scene in 2016. At one end of the table was a small, independently owned business that — along with the likes of the Basement, Mercy Lounge and 3rd & Lindsley — took considerable risk in launching music venues supporting emerging local artists, well before Nashville achieved international it-city status. At the other was a publicly traded mega corporation seeking to grow its market share.

During negotiations with Cobb and Billue, and again after the deal fell apart, an executive with House of Blues, which is the music venue division of Live Nation, revealed their strategy to “bleed the competition," Cobb said. Live Nation Co-president of North American Concerts Bob Roux didn’t use such strong language in an interview with The Tennessean, but he did say that the company is actively considering adding a 1,500-person club, and perhaps as small as a 400-person club, to its growing stable of Nashville venues.

In the past 18 months, Live Nation has taken control of two outdoor amphitheaters along with Municipal Auditorium. The company also has purchased a controlling stake in the Bonnaroo Music and Arts Festival. Live Nation’s expansion here has created more jobs, lured high-profile concerts like Neil Young and, if all goes according to plan, activated a dormant venue in Municipal.

But those moves, and rumors of more expansion, have put local club owners on notice. While Live Nation has been applauded within the music industry for its immediate success at the Metro-owned Ascend Amphitheater, stakeholders are worried that Nashville’s concert industry has reached its saturation point. And if the company makes good on its plans to open smaller clubs, it could be longstanding independently owned businesses that fall by the wayside.

“It seems to be harder and harder for the independent club owner and independent promoter in town,” said Todd Ohlhauser, owner of the Mercy Lounge complex that also includes Cannery Ballroom and the High Watt. “Ten years ago it was almost all independents. Now you’ve got AEG, AC Entertainment and, of course, Live Nation.

“I just wonder going forward with this perception of Nashville being so hot and everybody wants their foot in Nashville, it’s going to change a lot for all of us that have been here for a long time.”

Exit/In, Marathon Music Works on a roll

It’s ironic that Billue and Cobb built a successful live music business together because nine years ago, the former fired the latter. Billue, now 35, had recently bought Exit/In, the venerable 500-person club on Elliston Place in Midtown, and he said he fired Cobb without any hard feelings.

Billue had come to Nashville after owning Zydeco, a small club in Birmingham, Ala. After Cobb was fired by Billue in early 2007, he went back to independently promoting shows at venues across town, including Exit/In. Around the same time, City Hall, the roughly 1,500-person venue in the Gulch, had recently closed and Cobb felt like Nashville needed another club that size so he reached out to Billue to renew their partnership. Ultimately the pair found space inside the handsome brick Marathon Village building that Billue said “was (expletive) perfect.” Marathon Music Works, which holds up to 1,500 people, opened in late 2009. The company later partnered with AC Entertainment for its shows at Marathon while continuing to book an eclectic mix of artists at Exit/In. Since 2012, they've been partners in both venues.

In the past five years, Cobb and Billue have opened small bars attached to both venues — a critical component for their bottom line because live music venues make most of their money off alcohol and concession sales, while bands and promoters make money from tickets and merchandise. All together, their business employs about 35 people.

Billue said he’s proud they’ve carried on the tradition of Exit/In as a venue that books a broad range of artists. And Billue said he and Cobb have been gratified to see their bet that Nashville needed a club the size of Marathon Music Works pay off as well. Billue said running a music venue is a labor of love that comes with substantial risk each night they put on a show.

“Exit/In started 45 years ago and it’s still rocking and rolling, so in my mind that’s a win,” Billue said. “Anybody that gets into this game to get rich is definitely picking the wrong line of work. It’s a fun, cool job. I get to wear T-shirts and tennis shoes to work, but it’s not something you go into thinking you’re going to be a millionaire.”

As Ascend succeeds, Live Nation grows Tennessee business

Live Nation is by no means a newcomer to Nashville. The company has had different prongs of its business operating here, including promotion, venue management and concert booking, to go along with its ticketing company: industry giant Ticketmaster.

Roux said the company decided to bulk up its office presence here in late 2013 when Metro was bidding out the contract to operate Ascend Amphitheater. That decision brought about 40 full-time jobs located in their contemporary offices above Edgehill Cafe just off Music Row.

The office is run by Brian Traeger, president of Live Nation's Tennessee division, a rising star in the music industry.

Live Nation ultimately won the bid to run the amphitheater, as part of a package that included partners Red Light Management, the Nashville Predators and the Nashville Symphony. Ascend opened last year to rave reviews from the city and high marks from fans, according to exit surveys and industry awards.

The Academy of Country Music voted Ascend the best midsized venue in the country, and Pollstar, the gold standard publication for music touring, named Ascend best new music venue last year.

It turns out, running Ascend was just the beginning. Late last year, Live Nation inked a deal to book the Carl Black Chevy Woods Amphitheater at Fontanel, a 4,500-capacity outdoor venue at the property on Whites Creek Pike.

That followed a winning bid to Metro’s search for a preferred vendor to run concerts at Municipal, which at one time was the city’s premier large venue. The music hall lost steam over the past 20-plus years, especially since Bridgestone Arena was built.

Perhaps Live Nation’s most notable deal in Tennessee was purchasing a controlling stake in Bonnaroo, with hints at bringing more concerts and festivals to the Manchester farm.

“When you reach a certain velocity of live entertainment events, from club shows, to theater shows, to ballroom shows, to midsized amphitheaters, to arena to stadium shows, especially in a market with the rich musical history that Nashville has, it just starts feeding on itself,” Roux said. “Bridgestone was really the first step nearly 20 years ago in the vision of expansion in that city. Then in recent years you’ve seen the proliferation really take off.”

Music ecosystem disrupted

In Nashville, the concert business is a sort of ecosystem where small businesses and powerful corporations work together to put on shows and occasionally compete. For instance, Live Nation promotes shows from time to time at Cannery Ballroom, 3rd & Lindsley and the Ryman Auditorium. But the work of discovering, promoting and developing local bands has traditionally fallen to the smaller clubs, which have been independently owned.

It was those clubs that helped the local music scene along more than a decade ago before Nashville had any international tourism buzz. Live Nation's expansion could upset that ecosystem.

“We are looking for an appropriate opportunity to open a midsized club (with a) restaurant in the market to further develop new artists,” Roux said. “Ideally we would end up with a venue or site to allow us to have both a restaurant component, a special event space as well as a great music hall. A typical venue we might try to model in our portfolio would have a capacity between 1,500 and 2,000.”

So far, Live Nation's moves in Nashville have not threatened the smaller clubs, but comments like Roux’s have put those venues' owners on notice the industry giant could soon be playing ball in their league. Roux said he feels like the audience demand in Nashville is "absolutely outstripping" the supply and the market can handle more clubs.

The fear is that businesses that had skin in the game before Nashville was an it city would be the ones to suffer. And there are already signs that Live Nation's pursuit of small clubs has had a chilling effect on others opening new clubs in Nashville.

Drew Mischke, former general manager at the Mercy Lounge complex, recently kicked the tires on opening a music venue before deciding instead to open two new bars in the coming months. Mischke said the market saturation and discussion about more expansion by Live Nation played a key role in his decision to open bars instead of music clubs.

Cobb and Billue are opening new clubs, but not in Nashville. They have new venues planned in Kansas City and Knoxville.

Opinions on the fallout from Live Nation’s expansion vary. Ron Brice, whose 700-person club 3rd & Lindsley celebrates its 25th anniversary in 2016, said he welcomed the competition because he feels the existing venues offer something unique for a wide array of music fans. Sean Henry, CEO of the Predators, who operate Bridgestone Arena, said Nashville can accommodate fans and bands at every level with its current roster of venues.

Ali Harnell, senior vice president for AEG Live, which is viewed as perhaps Live Nation’s top competitor nationally, said Nashville’s live music scene is an “ever growing flame.”

“The magic question: Are we moving towards oversaturation in the venue and live music space in Nashville?” Harnell said. “By all counts to date, it appears if you build it, they will come. Shows are doing great, people seem to have the disposable income to buy tickets. All good right now.”

But Cobb said the growth is not sustainable and winners and losers will soon emerge.

"I don't know when it ends, but I do know we are at saturation now," Cobb said. "We're there. We haven't reached the tipping point where clubs start closing. Not yet."

Reach Nate Rau at 615-259-8094 and on Twitter @tnnaterau.

How a local live music scene is like a baseball farm system

If you think about a city’s live music scene like a minor league baseball system, smaller clubs that hold 500 people or fewer are like the Rookie League. Exit/In, Mercy Lounge and the Basement East would fit into this category. These clubs book a mix of burgeoning national touring artists and popular local artists. Local punk band Diarrhea Planet is on the wall of fame at Exit/In.

Marathon Music Works and Cannery Ballroom, with capacity over 1,000, would be the Single A team, with opportunities for established touring acts and artists starting to garner national attention. Indie rock artist Kurt Vile recently sold out Marathon Music Works.

The venerable Ryman Auditorium, owned by Ryman Hospitality, has a capacity of 2,500 and would qualify as the Double A of music venues for well-known artists like Chris Stapleton. The next step up is Triple A-level venues like Ascend Amphitheater, and many of its artists also would play the Ryman. Cherub has gone from playing the smaller High Watt to headlining a concert at the prestigious Ryman. Ascend's summer lineup includes artists like Neil Young, Modest Mouse and Weezer.

Bridgestone Arena and Nissan Stadium are the big leagues for major touring artists like Beyonce and Bruce Springsteen. A band can track its growth as it moves up the ladder and plays larger venues. The Avett Brothers are a notable band that can check the box for playing Nashville venues of all sizes.