This kind of thread comes up quite a bit. I'll repeat what I said in the last one - when it usually comes up, people ask about "live music," but what they really mean is "rock bands in bars." As far as I can tell, touring bands still sell concert tickets, Broadway musicals are popular both in New York and touring, summer concert series from your local Parks and Rec or library performances are still pretty well attended.
So I don't think live music itself is declining - but the cover band scene certainly is. There are a bunch of reasons.
Part of it is a change in the music market. The internet has fragmented it, and genres have shifted. The Top40 of today is not the same as the Top 40 of yesterday; it has less market share. Which means any given new tune is going to have less familiarity and enthusiasm than an old one, even if it's top ten. Meanwhile the top 40 of yesteryear is the "heart music" of a generation that's getting older and older. Young people do know and often love older music, the same as lots of 80s kids like me loved the Beatles, but it's not the same thing - that doesn't mean they're eager to go hear a bar band cover the Beatles.
One thing I was just reflecting on today was the issue of volume. Part of it is that overeager, or presumptuous, bar bands have driven lots of customers away by being too loud. I think there's another dimension of it, too, which is that for those people who DO enjoy getting blasted by an overwhelming wall of sound, there are now alternatives to live bands to get it. It's not the band that creates that, it's the PA system, and a DJ at a rave can generate the same effect and do the "Drop the bass" thing. That phenomenon puzzled me - why would anyone want to listen to a synth just generating a static, low-frequency tone, rather than a bassist actually playing a greasy low-end groove? - until I realized that for some people, all they really want is that rumble-their-bones feeling and it was never about musicality.
I think there's been a big cultural shift in terms of attitudes to nightlife in general. You don't need a singles bar when you have Tinder. Staying home is a lot less boring than it used to be, with all the manifold forms of digital entertainment. As a marketing theme, "Netflix and Chill" has been an extraordinary success. I see people on social media all the time - not just older people, either - who will post stuff asserting that some unnamed other people might be out swinging from the ceilings at clubs, but they're just going to curl up with a movie and a glass of wine at home Saturday night. You never seem to find out who those "other people" actually are or how you can get them to see your band. There's a kind of cost/benefit, risk/reward calculation over what to do on a Saturday night - is it worth the effort to get dressed, to go out in the cold and travel twenty minutes, to get to a bar where the band might really suck and be too loud and the drunks be really annoying, and you've got to work out a designated driver who's willing to go party with you without drinking themselves, or risk getting pulled over for DUI on your way home? Or would it be better not to bother and stay in and watch a movie?
And then, there's the life cycle of popular music genres. Blues and jazz are still a thing, and people still go to see them. But there aren't nearly as many jazz clubs around most areas as there would have been fifty or sixty years ago. The same thing is true of rock. There will always be rock bands, or at least for a long time to come, and people going to see them. But not as many people, and not as many venues. We're in a post-rock world.