alt Hacker NewsThere is a psychological hype effect which affects both audience and performers in a capacity room of any size. Whether it's 50 or 5000, if the room is full, you feel it, and it adds to the excitement, tension and maybe magic of the event. There's nothing worse than playing an empty room, and some of the best times I've ever had have been with a band and thirty people crammed into a living room.
As a musician myself, I can 100% confirm this. For me personally, small gigs are often the most fun because the audience is very close and you can actually see/hear the reaction of individual people. Noticing one or two excited audience members can already make a difference. Conversely, a Jazz musician once told me that seeing me in the front row, visibly enjoying his performance, fired him up. Also, in a small venue it is much easier to hang out with the audience after the concert.
One of the most fun gigs I had was a garage concert at a friend's place in Luxembourg we did on our way to a festival. The fact that weed had just been legalized in Luxembourg certainly contributed to a very receptive and enthusiastic audience. We ended up repeating our whole set :-D