I think you're right, but I think for a tradition to survive it also needs it's young, and there's nothing to attract young people into folk clubs at the moment.
(Some) festivals tend not to struggle, because festivals have a cooler sort of image, then there's the fun of the stalls, camping, etc.

The thing is that would put me off folk clubs were I not a folkie would be the type that sit with one finger in their ear and sing harmonies ever so slightly out of tune that it becomes agonising to listen to. I mean, don't get me wrong, that is a crass generalisation and I know that not all club singers are like that. But nonetheless, when this sort of thing is advertised as being 'folk music' it makes young folk enthusiasts run a mile.

Perhaps a more modern approach may boost it's profile in some way.