Credit: Photo by Darrow Montgomery

It’s early August and the Fillmore is naked. Only two of the nightclub’s four chandeliers are hanging, and the murals celebrating its namesake’s hippie heritage have yet to be painted on the blank orange walls. That doesn’t matter to Bruce Lee, president of Lee Development Group, who is beaming on the concrete stage. Lee has spent nearly a decade trying to bring a music hall near the intersection of Colesville Road and Georgia Avenue in Silver Spring—and what he calls the “Mercedes of music” is almost here.

When Mary J. Blige takes this same stage on Thursday night as the Fillmore Silver Spring’s opening act, Lee’s quest will be complete. “This project took two governors, two county executives, three economic development people, and two county councils to complete,” he says during a hard-hat tour of the space. The opening also required a one-of-a-kind, no-bid deal with Montgomery County and Live Nation Entertainment, the world’s largest concert promoter and parent company of Ticketmaster.

The Fillmore, which holds up to 2,000 people, has the potential to reshape the D.C.-area music scene. It could draw fans away from long-dominant venues like 9:30 Club and Black Cat, shifting dollars and buzz to the suburbs. Unlike other industries, more competition in the live music world can actually drive prices up as clubs throw money at the limited number of bands who can fill large rooms. The new entrant could cause a domino effect: Smaller clubs lose some of their acts to bigger stages, and a $15 show could easily become $20 with prices rising across the board.

Photo by Darrow Montgomery

And unlike most venues, the Fillmore has the support of a public company with deep pockets. Last year, Live Nation generated more than $5 billion in revenue. In the first half of 2011, the Beverly Hills, Calif.-based live events business grew its share of tickets sold for the top 100 concert tours from 41 percent to 48 percent. If the Fillmore succeeds—and that’s a huge if—Live Nation will have pulled off something that it and its corporate predecessors have never done: successfully running a nightclub in the D.C. market. Fortunately for Live Nation, it got a lot of help from Montgomery County.

Downtown Silver Spring’s revival wasn’t enough to activate the north side of Colesville Road. Montgomery County wanted that to change. In 2002, then-County Executive Douglas Duncan approached the Birchmere about opening another location in the old J.C. Penney building, owned by Lee Development. The Alexandria, Va., cabaret-style hall, which seats 500, has hosted major blues, folk, and jazz acts since 1966. The owners seemed like a good fit to operate a suburban venue. Duncan wanted the Birchmere to run an 800-seat music hall in Silver Spring for a sweet deal: The state of Maryland and the county would each contribute $4 million to the project. Lee Development would donate the land in exchange for the county’s approval to develop the surrounding site. All the Birchmere had to do was invest $1 million.

But the Birchmere negotiations dragged on, and power changed hands. Isiah “Ike” Leggett was elected county executive in 2006, and the county’s talks with the Birchmere broke down in the summer of 2007. Lee says Leggett wanted a bigger venue than Duncan’s Birchmere proposal. Montgomery County officials also wanted to seek another company to operate the venue because years of talks hadn’t led to any progress, says Diane Schwartz Jones, the county’s assistant chief administrative officer. The Birchmere owners want to put the whole thing behind them, and declined to discuss exactly why the deal fell through. “The Birchmere wishes Live Nation the best of luck,” says Jim Matthews, a Birchmere partner.

Photo by Darrow Montgomery

With the Birchmere gone, Lee pressed ahead. When he heard that attempts to bring a House of Blues in downtown D.C. in 2006 had failed, he contacted Live Nation to see if they were interested in a Silver Spring project. “They were like, ‘Where’s Silver Spring?’” he says. But Live Nation executives visited the site, and they liked its Metro accessibility, ample parking, and proximity to D.C.

Meanwhile, Seth Hurwitz, co-owner of 9:30 Club, decided his promotion company, It’s My Party Inc., could run the proposed venue. He says he didn’t express interest sooner than 2007 because he felt the Birchmere would be well-suited for the project. Now that they were out of the picture, a letter outlining Hurwitz’s intentions was hand-delivered to Leggett on Sept. 24, 2007. But Hurwitz was too late. The county and Live Nation signed a non-binding letter of intent for the site on Sept. 18 of that year. The deal was similar to the one offered to the Birchmere, but Live Nation was not required to invest money in the construction of the nightclub.

Lee says Hurwitz had showed no interest in the site until “the eleventh hour.” After Leggett rejected his proposal, Hurwitz aggressively lobbied the county council and state lawmakers. He argued that his Bethesda, Md.-based company would supply acts tailored to a local audience better than Live Nation, would pay double the monthly rent of $7,500 that Live Nation would pay, and would split naming rights royalties with Montgomery County. Alternatively, I.M.P. offered to build the music hall without a subsidy in exchange for full ownership. The county denied all Hurwitz’s advances and, ultimately, the council approved the project in October 2008. Hurwitz sued county and state officials when costs for the project rose from $8 million to $11.2 million, alleging that the bonds they issued for the Fillmore were illegal, but a judge dismissed his lawsuit in March.

Lee Development, also the general contractor for the project, turned over the completed building to Montgomery County last month. The county chipped in more money for the Fillmore by diverting funds from parks-and-rec projects that came in under budget. Live Nation covered the rest of the cost; under the terms of the lease, that money is considered pre-payment of rent. So, Live Nation may not have to pay rent again until 2017 (though the county won’t know the exact figures until October, when it has a full accounting of the company’s contributions to the project). Regardless of the rent payments, the nightclub is expected to bring the county about $200,000 and the state nearly $900,000 in annual tax revenue, Schwartz Jones says.

For his part, Lee says he’s delighted with the end result. The Fillmore is built so it could easily be connected to a new hotel and office complex, and he has about 15 years to decide just when to build such a site. The county must grant him approval for these projects—or pay him nearly $44.4 million to get out of their agreement. Lee is waiting for the real estate market to improve before he finalizes his plans, but thinks the Fillmore will be a great amenity for guests of the proposed hotel and office building. I ask him what kind of hotel he’d like to put there. His answer isn’t very rock ‘n’ roll: a Residence Inn by Marriott.

Photo by Darrow Montgomery

Live Nation Entertainment is premised on the notion that the music business can be tamed. Concert promotion and talent management is rampant with small-time operators that can be acquired or crushed by a savvy corporate player armed with spreadsheets, scientific management techniques, and strategic access to the capital markets. It’s artistry as algorithm: What works well in one market can be applied globally with efficiencies achieved and outsized profits earned. And Live Nation has scored impressive results with this philosophy. Since its spin-off from the radio empire Clear Channel Communications in 2005, Live Nation has grown annual revenue from $2.9 billion in 2005 to more than $5 billion last year. The company promoted more than 21,000 live music events with more than 2,300 artists in 2010. It struck multi-year business deals with Madonna, U2, and Jay-Z. It runs a talent management division with a stable of about 250 artists and has booking rights or investments in 128 venues, including the House of Blues and Fillmore chains in 17 cities. (For comparison, Anschutz Entertainment Group, the second-largest concert promoter after Live Nation, owns, operates, and consults with more than 100 venues worldwide.) In January 2010, Live Nation completed its merger with Ticketmaster, the world’s largest ticket sales and distribution company. In its most recent quarter, Live Nation reported a $13.3 million profit, ending two quarters of losses. The company beat analyst expectations partly due to better than expected revenue from its concert business, which rose 26 percent from the same quarter a year ago to $1.08 billion.

The Fillmore Silver Spring operation is a tiny cog in the Live Nation machine. The original Fillmore, which fostered the careers of the Grateful Dead, Janis Joplin, Jefferson Airplane, and others in the 1960s, came to Live Nation through a series of acquisitions after the death of its famous owner, Bill Graham, in a 1991 helicopter crash. Live Nation announced it would expand the Fillmore “brand” to more markets in 2007. It renovated Irving Plaza to create the Fillmore New York at Irving Plaza, the Theater of the Living Arts to establish the Fillmore Philadelphia, and turned Detroit’s State Theatre into the Fillmore Detroit. Each location featured chandeliers based on those at the San Francisco Fillmore and murals inspired by the original club’s trippy promotional posters.

Public reaction has been mixed. Live Nation had to restore the Fillmores in New York and Philadelphia to their old names after fans complained. But those were just bumps on the road. The Fillmore brand added a Charlotte location, the Jackie Gleason Theater in Miami, the Fillmore Auditorium in Denver, and now Silver Spring.

Live Nation classifies a venue the size of the Fillmore Silver Spring as a “music theater.” While the company does not break out the financial results of the Fillmore brand, it did say this about the 31 music theaters it owns or leases in last year’s annual report: “Because these venues have a smaller capacity than an amphitheater, they do not offer as much economic upside on a per-show basis. However, because music theaters can be used year-round, unlike most amphitheaters, they can generate annual profits similar to those of an amphitheater. Music theaters represent less risk to concert promoters because they have lower fixed costs associated with hosting a concert and may provide a more appropriately-sized venue for developing artists and more artists in general.” Um, rock on.

Nightclubs come and go, but the D.C. market has two venues that have outlasted waves of competition: 9:30 Club and Black Cat. 9:30, whose current space holds 1,200 people, has been in business since 1980 and is directly challenged by the Fillmore’s arrival. Black Cat opened in 1993 and can hold 700 on its main stage and 200 on its backstage downstairs.

Exactly how much competition those old standbys will face for booking from the Fillmore, though, isn’t clear. “Bands want to play at the 9:30 Club or the Black Cat. No band is saying, ‘Hey, I really want to play at the Fillmore Silver Spring,’” says Steve Lambert of Hood Booking, which promotes shows for the Rock & Roll Hotel, DC9, and Red Palace. 9:30 Club’s Hurwitz and Black Cat owner Dante Ferrando both say they are not concerned about the Fillmore. “I was afraid they were would be competition. After looking at their schedule, I’m not worried,” Hurwitz says. Hurwitz thinks 9:30 Club has a history and connection to fans that will be difficult for the Fillmore to replicate. “It’s intangibles that can’t be explained. They need to evolve organically. It’s not as simple as wall coverings, lighting fixtures, and fruit,” he says.

Look at the calendars of the Fillmore and 9:30 Club and certain things stand out. Acts at the Fillmore tend to cost more: You’re shelling out $89.50 for a ticket to see Mary J. Bilge on the Fillmore’s opening night, $69.50 for John Legend on Sept. 17, and $50 for Black Star on Sept. 18. Cheap Trick is not so cheap at $45 on Sept. 27. And none of these prices include a Ticketmaster service charge, which the venue will still apply even though the tickets are sold by a corporate cousin. On the same dates at 9:30 Club: The Low Anthem for $20 on Sept. 15, Atari Teenage Riot for $25 and Clap Your Hands Say Yeah for $25 on Sept. 17, Molotov for $25 on Sept. 18, and Matt Nathanson for $25 on Sept. 27. These prices don’t include the $6 per-ticket service fee and $4 processing charge if you buy 9:30 Club tickets online through Ticketfly.

Granted, these aren’t apples-to-apples comparisons. So, let’s look at two acts from the same genre going against each other on the same night. On Oct. 17, the Fillmore has Bush for $41.50, and tickets are still available. The 9:30 Club has a sold-out Smashing Pumpkins show, which cost $55 when tickets were on sale. Legal ticket-scalping sites, like StubHub, are selling Smashing Pumpkins tickets for about $100 now.

Hurwitz’s company and Live Nation have battled on other fronts beyond the aforementioned venues. Live Nation owns Nissan Pavilion and promotes shows at Verizon Center, Warner Theatre, Rams Head Live, and Lisner Auditorium, among other local venues. I.M.P. manages operations at Merriweather Post Pavilion and promotes events at Constitution Hall, the Music Center at Strathmore, and the Lyric Theatre and Meyerhoff Symphony Hall in Baltimore. (Hurwitz likes to point out that a promoter acquired by Clear Channel and later spun off to Live Nation failed at running the Bayou and Nation clubs in the District.) I.M.P. also filed an antitrust lawsuit against Live Nation, which is currently tied up in court.

While Hurwitz often portrays his disputes against Live Nation as a David-versus-Goliath struggle, he is downplaying his promotional skills. 9:30 Club won the “Nightclub of the Year” award in 2009 as voted by readers of Pollstar, a trade magazine that covers the concert touring industry. That’s particularly impressive when you consider that Pollstar’s readers are concentrated in the music industry hubs of Los Angeles, New York, and Nashville, says Gary Bongiovanni, Pollstar’s president and editor-in-chief. “It’s fairly rare for nightclubs like the 9:30 Club and the Black Cat to last as long as they have,” he says.

The addition of the Fillmore to the D.C. club scene could have a perverse effect on prices. “Counterintuitively, competition can lead to higher prices for the end users,” Bongiovanni says. It’s easy to scapegoat Ticketmaster or club owners for high-priced tickets, but the artists are really the ones with the leverage. They demand guarantees before promoters get paid. Since it’s harder for a musician to make a living from records and royalties in the age of digital music, more artists are demanding a bigger slice of the ticket money. It’s a tough calculation to make as an artist: Price tickets too high, and you’re playing to an empty house; too low, and you may have left money on the table during your 15 minutes of fame. If you have confidence and patience—say you’re an act like Mumford & Sons—you give your fans a break so you can attract repeat business show after show. If you’re a washed-up boomer act or a pop sensation, you grab the market by the neck and wring it for every last penny because you don’t know if this tour paycheck will be your last. Regardless, the rivalry among clubs for good acts could drive up prices. “More competition can easily turn a $15 show into a $20 show,” Ferrando says.

That calculus works differently in every city. In D.C., 9:30 Club has a reputation for not overpaying acts. “Seth Hurwitz knows how to say ‘no,’” Bongiovanni says. For its part, Live Nation wants to avoid cutting prices on its best seats. “The focus this year was to price the house right from the beginning, to drive higher revenue from the front and lower prices in the back to stimulate purchase. The key strategy to achieve this, No. 1, was no mass discounting,” Chief Executive Michael Rapino told analysts on a second-quarter conference call.

While Live Nation can use its industry muscle to bring big acts to its amphitheaters and stadiums, that kind of influence matters less on the club circuit, where it’s more about relationships. “The fact that Live Nation owns the club is irrelevant,” says Bob Lefsetz, author of The Lefsetz Letter email newsletter and a music industry gadfly. “If you have a hot act, people will see it in a barn.”

Live Nation is quick to emphasize how the Fillmore will develop local talent. Arich Berghammer, Live Nation’s executive vice president of clubs and theaters, tells me he’s open to having Ethiopian music at the Fillmore after discussing the lack of such shows with his cab driver during a recent trip to Silver Spring. Berghammer notes that Stephanie Steele, the Fillmore’s general manager, and Justin Kujawa, a Live Nation senior promoter, live in the neighborhood and will be responsive to the community’s tastes. Kujawa says the Fillmore is working with entertainment website and event planner Brightest Young Things to develop nights for local bands. “We want to do things in every genre,” Kujawa says. “We are trying to make everyone happy.”

The broad approach of the Fillmore may compete with I.M.P. bookings at D.A.R. Constitution Hall as well as 9:30 Club. Black Cat’s Ferrando says that Live Nation may take some acts that would play at 9:30 Club, which would then force 9:30 to compete with his club; he may end up booking an act that would otherwise play at Rock & Roll Hotel or Iota in Arlington, Va. “It could have a domino effect on bookings at all the other clubs,” he says. Hood Productions’ Lambert expects to feel a “pinch” from the Fillmore for the first six months, but says, “we’ll be fine.”

Staring out from the stage into the empty space of unfinished Fillmore, I imagine the screaming crowds. I try to picture the place packed to the rafters and how close fans on the balcony would be to the stage. What it would feel like taking the elevator from the spacious downstairs dressing rooms to the main stage. How fun it would be hanging out in the VIP lounge with its wavy mirrored accent wall. The outside of the club looks sharp at night, with the Fillmore marquee underlined by a red neon slash. A Lee Development official tells me they’ve set up lights in the three vertical vents on the right side of the hall’s façade to simulate an equalizer when the music is playing inside. It all sounds very cool.

But walk across Colesville Road, and you’re still in downtown Silver Spring. The nearby shopping center is a menagerie of chain restaurants from the sublime—Nando’s—to the pedestrian—Red Lobster—with 8,000 free parking spaces in the surrounding area. Surely Fillmore patrons and some acts will flock to these places after events, but it’s difficult to see them coming for the vibe. It’s a county, after all, that recently proposed a curfew for teens.

Will the location’s ambient tameness hurt a gorgeous theater that will still do great business with date-nighting parents or diehard fans shelling out big dollars for well-known acts? Probably not. But it also means there will always be a market for music on U or H streets, no matter who controls the spaces along those corridors. In the end, the Fillmore, which will surely please lots of concert-goers, may even end up pleasing D.C. club owners, too.