You're confusing "local club" with "bar band."
The bar band industry won't die any quicker than the alcohol-serving industry.
It's not glamorous and it won't make you rich, but if it's what you want to do, it's fun and lets you play for an audience.
The problem is not that there is a shortage of venues, but a shortage of big profit venues, and too many egotistical artistes think the world owes them millions for sharing their "style." It doesn't. 99% of bands never even make enough for the members to support themselves; they do it for the love of the music.
And that love of the music is why I'd far rather go to a local bar, buy one beer, and listen to a band that wants to play their music than some hack like Rihanna who expects the entire audience to wait for two hours while she gets stoned before stumbling on stage and putting on a lacklustre performance. Don't get me wrong -- the girl has pipes -- she can sing. But she's too rich and lazy now to put in a real effort anymore for the audience.