With stages silent, Austin’s music venues need help to stay open

In his role as spokesperson for the cluster of live music venues concentrated on Red River Street, Cody Cowan relies on a graphic visual to convey the reality of those businesses’ prospects of surviving the Covid-19 pandemic.

Now fully closed since mid-March, with no revenue coming in and monthly fixed costs of around $40,000 per business, Cowan says owners of venues are in the position of holding their breath underwater with diminishing hopes for oxygen in the form of public aid or a return to full business.

For some, the oxygen has already run out. In June a trio of music venues on Red River – Barracuda, Scratchouse and Plush – announced they will not reopen. Those announcements came on the heels of news that beloved live music spots Shady Grove and the original Threadgill’s were going out of business. And a recent study from the University of Houston finds that more than half of the city’s music venues may perish by the end of October.

Covid-19 infections and hospital rates in Texas reached new highs almost daily through most of July before a recent leveling off, but Cowan and others who follow the local live music industry expect it will be impossible to meaningfully reopen before 2021.

“These businesses, all of their fixed costs have remained throughout that time, including rent and utilities, insurance and those sorts of things, while there have been zero sales,” said Cowan, the former general manager of the Mohawk and in recent years the executive director of the Red River Cultural District.

“That means they’ve had to burn through all of their savings, including personal savings on top of the business’ operational cushion.”

The business models for live music venues rely on large gatherings of people in the evening hours several days a week, which makes it difficult to operate profitably with less than full capacity.

That reality has caused venue owners to push local leaders for special aid for rental assistance or other fixed costs from the city, though those prospects appear narrow.

The businesses can apply for federal aid like the Paycheck Protection Program and the Economic Injury Disaster Loan program, but live music advocates have argued that more specific financial help is needed.

Locally, there are two programs available to possibly assist music venues. The Creative Space Disaster Relief Program, which has $1 million total available for grants of up to $50,000, is open to arts and creative spaces of all kinds, not just music venues. It received 65 applications with requests totaling $2.7 million.

And the Small Business Relief Grant program has $16.5 million total available for small businesses of all kinds, including music venues. It received 1,044 applications for $29.5 million in assistance.

Music venue advocates are pushing for specific assistance from the city for music venues, with a $20 million package expected to be discussed at an August meeting of City Council.

During the recent vote that created the city’s framework for spending federal aid, including more than $170 million from the Coronavirus Aid, Relief and Economic Security (CARES) Act, City Council members opted to move some of the $103.2 million for economic stability away from small business assistance so more money could be directed toward aid for individuals.

Council Member Kathie Tovo, whose district includes downtown Austin where many music venues are located, said long-term damage to the local live music industry would impact many other business sectors and employment throughout the city. Chief among those is the hotel and hospitality industry, which has recently been forecast to expect a five-year slump caused by the pandemic that will result in a drag on hotel and state liquor tax revenues for the city on top of immediate job losses.

“I’m concerned about it because in addition to being an important part of Austin’s culture and important part of our economy, that means it’s an important piece of employment,” Tovo said. “And it’s also the thing that causes people to want to spend time and money here, so the success of the live music industry has a large impact on the success of our hospitality industry, and within that category there are also many, many jobs represented.”

With Council likely to focus on next year’s budget for much of the summer, it appears no new aid for music venues would be forthcoming until fall at the earliest. Tovo said there are longer-term options for the city to purchase downtown properties to preserve them as music venues or creative spaces.

Those uses are seen as two of the benefits of a long-discussed effort for the city to create an economic development corporation that would be able to use public funds in a more flexible way to enter into real estate projects and other business deals.

Asked about the possibility of more rental assistance and short-term aid for venues, Tovo said the city has committed its available aid dollars and is unlikely to draw further from budget reserves.

“The needs across the community are great and it’s really unclear … we certainly can’t meet them all,” she said. “It’s unclear to me how that would rank on a priority list.”

At the federal level, the recently organized National Independent Venue Association is lobbying Congress to pass a $10 billion stimulus bill that would include aid for music venues in the form of tax credits, further unemployment insurance, and loans with longer terms and more flexibility in how they can be used. Texas Senator John Cornyn is one of the authors of the legislation.

One of the founders of NIVA is Stephen Sternschein, co-owner of the Empire and Parish music venues as well the Heard Entertainment promotion company.

He said federal loan programs like PPP and EIDL have provided about six months of cushion for the businesses that were able to secure one. Without further aid, Sternschein said he will likely have no choice but to close his clubs in October, and most venues will be lucky to make it that long.

“If something doesn’t change, I think that (a 30 percent survival rate) is conservative. There is nobody on the planet – except for the biggest promoters – that can survive for six months with no income without help, and that’s not in the cards,” he said.

“Let’s say we can get to October. It takes a big mass of people coming out to have a great time … do you think that is going to happen again? It’s going to be a slow, slow, slow trickle and there is no way in October we’re going to be able to make enough money to not still need help, even if we’re open.”

The prospect of post-pandemic Austin with as few as a dozen music venues could hollow out the city’s reputation as the Live Music Capital of the World, or at least dramatically shuffle where people go to see performances.

“There’s been a lot of discussion overall about the move out of cities, that people are moving out of cities right now,” Sternschein said. “The problem with that approach is (the suburbs) are a side stage, and downtown is the center stage. If we leave downtown all that is going to be left is Live Nation venues and that’s not really the Austin music scene … and then we’re not the Live Music Capital of the World anymore. If you’re not operating as a club in the sight of the Capitol, are you really in Austin?”

Cowan illustrates the city’s slow response on small business aid by noting that as of mid-June the CSAP program had only just opened its application process, and the CLEAR loan application process didn’t open up until the second week of July.

That delay and lack of resources, he said, is likely to cause large numbers of small businesses in all categories to close as an effect of the pandemic.

“Unequivocally and objectively we’re seeing that top to bottom, federal to local the response was lackluster or totally absent in terms of the pandemic,” he said. “Locally in Austin I’d say, I feel like government has not adapted and grown with the growth of the city over the past 10 years. The sort of sluggish response we’re seeing now is really a reflection of what we already saw the past 10 years on things like affordability for local and small businesses.”

This story was produced as part of a partnership between the Austin Monitor and Austin PBS’s Decibel.