well, at least in the area where most of my gigs are, there was some of what you describe ... smaller places being hammered by covid challenges. But, what also seemed to happen here is that there were venues that started having music that never had before ... mostly restaurant/bar type places that added outdoor spaces during covid, and then decided to include live music outdoors. This works pretty well in my area (SF Bay Area) because the weather is generally very mild and there is a pretty solid outdoor live music scene nearly 9-10 months each year. The net results of all that here, is that while a few places shut down, there were more places that added live music, so there was a net gain for live music venues.
So for me anyway, its not lack of venues. If I really dig into this, I would say that the biggest challenge is a meaningful percentage of the live music venues have moved to mostly solo/duo type stuff and away from full bands ... and there does seem to be way more bands competing for what remains of the the gigs too. Band quality is all over the map, but I don't think the venues really care about quality if the band draws paying customers to their food/drinks .... but that's entirely other story.