Problems include reduced audience spending, huge increases in insurance costs and a weak Australian dollar - but there are still some opportunities, said Kris Stewart from QMusic, the peak body for Queensland's music sector.
"This is Halley's Comet, not the end of the dinosaurs, I think this is an extraordinary moment in front of our eyes," he said.
Iconic Brisbane live music venue The Zoo, which has been operating 32 years, closed its doors in July after running at a loss for the past three years.
John Collins says current challenges could prove fatal for many venues across Queensland. (Sergio Dionisio/AAP PHOTOS)
At Gold Coast venue Mo's Desert Clubhouse, expected attendance has halved, while operational costs are up 200 per cent over the last 12 months.
"Smaller venues have always run on the smell of an oily rag and the current challenges could prove fatal for many of these rooms across Queensland," John Collins, from Fortitude Valley's The Triffid, said in a submission to the hearing.
The future of Australian music is in the hands of small and medium-size venues like these, Mr Stewart told the committee hearing in Brisbane.
Their survival has flow on effects for musicians, who can't fund new recordings or marketing without income from gigs at these venues.
"If we want an Australian industry in 10 years from now, we need to acknowledge that our small music venues are the soil from which our artists grow," he said.
The overriding challenge for musicians is discoverability: a new generation is not hearing Australian music on the radio, because it is listening via algorithm, with demand for Australian music locally the lowest it's ever been, according to Mr Stewart.
He called for a nationwide strategy comprised of both incentives and regulation, saying the future of the industry should not be left to the market to decide.
Big international tours should be told to hire local support acts, while government funded culture passes that subsidise young people's spending in Europe could also work in Australia, he said.
Another long term solution could be to put a small amount of money from ticket sales for large concerts into a charitable trust to support grassroots music, a solution that has been tried in the UK.
Despite the struggles of venues like The Zoo, some live events are still managing to succeed, such as festivals that appeal to an older demographic or single genre of music, the hearing was told.
But another looming challenge for the industry is artificial intelligence - the soundtracks and background music that are worth billions to the sector when composed by local artists could soon be generated by the technology.
"There is a version of this that is a comet hitting the earth," said Mr Stewart.
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