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Dog With Two Tails manager Michael Wilson said small venues allowed artists to hone their craft and connect with fans.
"If we want Dunedin music, we need these small music venues."
A power imbalance in favour of noise control got in the way of the city achieving stated aims such as a vibrant city centre, he argued.
The centre was the logical place for music venues, he said.
Musician Dr Fairleigh Evelyn Gilmour asked the Dunedin City Council to fund investigating an equitable solution.
Dave Bennett, who was behind a petition calling for live music in Dunedin to be saved, said the city was committed to fostering the arts, but this was difficult when people risked fines, loss of trade and equipment seizure.
"The fact potential intervention is so punitive is extraordinary."
A folk show at Dog With Two Tails was shut down on April 9 and police were called in.
The council has since apologised, as a noise assessment was not carried out correctly.
Owners of apartments next to the venue have said the council should have required installation of sound mitigation.