Newcastle's 146-year-old Victoria Theatre will have seating for 500 people and could help replace the Cambridge Hotel as a live music venue when the first stage of its renovation is complete.
Sydney-based Century Venues, which bought the Perkins Street building in 2015, will match that funding to help bring the Victoria back to life as a venue for theatre, comedy, dance, music and private events.
The work will include tiered seating for about 500 people on the theatre's ground level, a bar, back-stage areas and sound and lighting equipment.
Century hopes the theatre will reopen in about 18 months. The second stage of the renovation, which remains unfunded, will include seating for about 450 in the upper dress circle.
"Stage one will deliver a very significant ability for the theatre to house work," Century director Greg Khoury said on Wednesday.
"It's really only the high-end, big theatre productions that require flying that won't be able to be housed."
Mr Khoury was confident a 500-seat venue would "work" in Newcastle, filling a gap in the market below the 1450-seat Civic Theatre.
"We know it can turn a profit, but the funds required to initially bring it back to life are beyond the ability of the business to sustain it.
"One benefit of COVID is that government and Treasury have seen that, if you want a vital CBD, you can't just have shops, bars and restaurants. You need other things to draw people in."
The Victoria's seating will be removable, allowing it to host stand-up rock concerts about six months after the city's premier live music pub, the Cambridge Hotel, is scheduled to close to make way for high-rise apartments.
Mr Khoury said the Victoria would "absolutely" fill some of the Cambridge's role in hosting live music.
"I think it's a great shame the Cambridge is closing. We need more venues, not less. The reality is the competition is not another live venue; it's staying at home.
"I think Newcastle has the potential to be an embedded part of the touring circuit. That's fallen away, which is a shame, but it can be relatively easily revived."
Unlike the nearby Civic Theatre, which was restored meticulously in the early 1990s, the Victoria's interior will be left in its "abandoned" condition.
"The whole concept for this renovation is not to attempt to create a deluxe renovation like the Civic," Mr Khoury said.
"We'll arrest the decay and make it safe. We're going to play on the history of it. It will have its own vibe."
The state government's funding pledge comes six months after the NSW and federal governments promised to spend $5 million each on the $39 million expansion of Newcastle Art Gallery.
