Thirty-three live music venues across New South Wales will share $3.8 million in a third round of state Venue Upgrade Grants, announced on Monday by John Graham, the Minister for the Arts and for Music and the Night-time Economy.

The money pays for physical work: soundproofing and audio-visual equipment, screens and lighting rigs, staging, energy efficiency, and planning advice for venues preparing bigger changes.

The largest single grant is $500,000 to the King St Hotel in Newcastle. The Lansdowne in Chippendale and the Hoey Moey in Coffs Harbour receive $150,000 each, the Brass Monkey in Cronulla $121,096 and the Press Basement Bar in Tamworth $68,022. Those five venues account for about $989,000, or roughly a quarter of the round, against an average across all 33 of about $115,000.

Graham put the reason for the round plainly. "In the last few months we've lost more than five venues in Sydney including Mary's Underground and Moshpit Bar," he said. He said the round was aimed at the venues carrying the most programming: "We're investing in the core music venues, venues that are playing five or six nights a week."

Emily Collins, head of Sound NSW, said the grants "will increase fit-for-purpose live music venues across the state and improve audience experience".

The government's stated case for the screen and lighting money is competition for attention. It says better audiovisual capability helps venues compete with streaming, social media and other new media for a night out.

The competition that is harder to fund against is closer to home. Bands in New South Wales are drawing crowds to shows in skate parks, backyards, warehouses and boxing gyms, spaces that carry no soundproofing obligation, no liquor licence, no lighting rig and, in most cases, no rent. A grant that pays for a venue's acoustic treatment does not change the cost base that makes the alternative attractive.

The Venue Upgrade Grants go to privately owned licensed premises, most of them pubs and bars that sell alcohol and food and put on bands. That is a different category of spending from a grant to an artist or a presenting organisation, and the state runs both. In April, Graham announced $3.1 million in Local Audience Development Grants split between 28 recipients receiving up to $100,000 for events and all-ages programming and six receiving up to $200,000 to promote NSW music.

Venue operators receiving money described work they had deferred. Jed Nakhle, who owns the Brass Monkey, said the grant "has given us the opportunity to finally make much-needed improvements" to the Cronulla room.

This is the third round of the program. The measure that will settle whether it works is not the number of upgrades completed but the number of rooms still open in twelve months, and on the minister's own count, more than five Sydney venues have closed in the past few months. Sound NSW publishes the recipient list for each round.