Well, I live in Canada's largest city,(Toronto) and live accoustic music preformance venues have become a bit of a joke here.
We have one excellent club (Hugh's Room) and that's about it.
A smattering of smaller places where recording artists gather, play feature sets, and basically sell their cd's to each other...
which is fine community support, I suppose - but kind of inbred, in a way -
Back when clubs flourished, it was very difficult to record - affordabiity.
Now it's dirt cheap (digital technology) - so this feels far more useful, and a reasonably positive use of one's time and resources.
Karaoke bars, strip clubs, sports bars...all struggle along.
But of course, the reason for the dearth of club audiences is easy to track....where are they all? Wander into video and dvd rental outlets on Friday and Saturday nights - they're all in there. Home entertainment.
Concerts still do well. Major venues draw at outrageous prices. Wealthy people still have the need to parade in public.
But any kind of grassroots thing - struggles in this city.
There is no college crowd (which used to be the backbone of support, traditionally, in North America.)

Even 25 years ago, back in the early eighties, when I ran a small club here, and the roster of young writers and performers was top-rate, most of these all had good day jobs - it was not something they were doing for a living.

I believe another important factor in North America anyway - is the population shift - away from urban to suburban and exurban. 70% of the population now live in these settings - and there is precious little of any kind of accoustic-based entertainment you will find in these locations.
People will fight their way downtown to attend a major sporting event - certainly not to sit in a small club.

I believe also, with modern music trends, there is a kind of stigma - attached to what many regard as "simplistic" or even "old-fashioned" music. There is no mainstream attraction any more.

I would think that with various styles and traditions, folk music does better in locales where it was first born. It tends to do better in places with longstanding roots and tradtions - for example, the celtic styles in our Maritime region on the east coast.
These just don't "import" as well as they used to do.

Of course, living in a cosmopolitan city, world beat is alive and well and very strong - and this has replaced much of what went before - which makes sense. Newer arrivals are playing their own stuff, and are supported within their own communities.
A lot of it - is still the music of the people, and in a way, could be described as folk music - just not in traditional European or North American styles.

I'll leave you with a story. Back in 1982, I used to frequent a club here in Greektown called "The Trojan Horse."
Their house band - was an assorted collection of men who called themselves Los Campaneros....and this was anywhere up to 15 different musicians - many who could be found on stage at the same time.
They played standard instruments (guitars, piano, bass, viloin, etc.) as well as more exotic instruments from the Middle East, South America, Africa, etc.
On a given night, one might have seen perhaps 40 different instruments played.
They were truly a united nations assortment. They sang in Spanish, Greek, Arabic, Turkish, Persian, African dialect...almost everything except English.
They sang truly anthemic and heroic material - with great rousing choruses that would feature harmonies from perhaps 10 or more singers at the same time.
They would often switch instruments in between songs...a guitar player would grab a flute, the flautist would sit at the piano, the piano player would pick up the bass, the bassist would take up the violin........
My second or third visit to the club, I sat closer to the stage, and in a break in between sets, got brave enough to say hello to the piano player. I noticed he was missing a middle finger on one hand (an industrial accident.)
These musicians were all blue collar workers.
I spoke to him - saying I was only an English speaker, and what were all these magnificent songs about? What did the words say?
He smiled and said...we all learn the lyrics of each others' songs - it is easy. We come from many places of extreme hardship, all over the world - and here, we sing to congratulate each other on our freedom to sing what we believe, what we feel, what we have overcome in our lives.
I miss that place. I miss that band.