Melbourne's live music industry is facing a severe crisis, with 50% of venues threatened with closure.

Rising operational costs, including a dramatic hike in public liability insurance, are major factors jeopardizing these venues.

Criticism is directed at the government's Always Live program for not adequately supporting small and grassroots music venues.

Industry professionals are urging for policy changes, including tax relief and state-backed insurance options.

A federal parliamentary inquiry has been initiated to investigate the issues and propose solutions to save the city's live music scene.