Is the issue with the welsh clubs just that they can't get bums on seats for games?
The issues run far deeper. Where Ireland had 4 historic provinces to easily feed the clubs into and England/France have several large cities and rugby heartlands to spread the load, the entirety of Welsh rugby scene resides in a small stretch of the South West which would fit between Wexford and Dublin in South Leinster alone.
They were firmly entrenched in their clubs for decades and centuries and there was no easy way to split/merge those clubs into professional regions without pissing off supporters. The traditions, history and rivalries of those clubs ran too deep and their is no feasible way for Welsh rugby to fund more than 3 or 4 professional outfits.
Add to this a hatred for being stuck in a league with the Irish and Scots while casting ever envious glances at an English setup which doesn't want them, and the fans have never bought into the modern era of Welsh rugby and don't attend matches in the numbers needed for the regions to be profitable and competitive.
At various stages though, it has been the Scarlets and the Ospreys who have come closest to bucking this trend and it seems ridiculous that those two are the regions to be merged, rather than Blues and Dragons.