Draxas
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Well, in a larger indoor or outdoor venue, sounds have much further to travel before reaching most of the audience or echoing off of a wall or other solid object. So the same level of volume sounds quieter.
Now that I think about it, he may be referring to the distortion that occurs at high volume from the speakers. It can make things sound grainy, fuzzy, and unintelligible, hence "lower quality", but it has less to do with the quality of the sound, and more to do with the quality of the speakers and amps. And as above, it has less of an impact over longer distances.
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