I'll have to side with the venue, also. It costs venues money to have live music. There are at least three organizations which require annual fees from venue owners.
I have a good friend who owns a very small pub in Fort Worth, TX who has had to stop having live music in part because of these fees. In my friend's situation, the place is so small that he can't get many people in; there's limited table space; there are multiple entrances which make it difficult to charge a cover. So in his case, after the fees, paying the performers, and not being able to get as many patrons in, he ends up losing money when he has live music.
If he were able to charge a cover, it would be possible for him to continue to have live music. It's a loss, because it's a great venue, with a great atmosphere, and there are several musicians in the area who would love to play there, myself included. But everbody misses out when the venue can't recoup the cost of having live music.


-Branwen-