Critically there was a pecking order and enormous social signalling and numerous middlemen working it.

A random piano player didn't appear in a random bar, there were agents working things such that your 60th percentile musician tended to appear in the 60th percentile bar (or at least 60th percentile of PAYMENT regardless of bar quality LOL).

Everyone involved in the system was very interested in their relative position in the pecking order vs money greasing the wheels.

Proposing that you scrap that and play a recording is very strange. First of all it was a long time until a random bartender could operate the playback machine as a secondary task. So you need a musical specialist and its not immediately apparent that a record mechanic or record engineer is going to be cheaper than some random vocalist. Meanwhile you lost your spot in the pecking order and people who want to hear music while drinking and dancing are going to be confused. Instead of paying a small amount of untaxed undocumented revenue to the band your agent found, you now have to raise capital and you have to purchase and install hardware and you have to maintain it when it breaks and you have to operate it. Note the latter has a lot of both "you" doing labor and "you" financing whereas the old system your agent took care of making a guitar player show up with the guitar the player purchased and tuned and maintained. Its not that great of a deal for the venue owner.

As an analogy, locally there is a college marching band that is competitive with other marching bands and they put on quite a show. Technically I could replace their instruments with MIDI connected drum machines and they'd sound better. I could replace the whole marching band with a 90s audio CD boom box and a single veteran soldier who can march. In practice they see themselves as a competitive marching band team, not as a commodity source of drum music. The ideal commodity source of drum music is a CD boombox, but football games have marching bands perform which is a totally different situation.

I wonder if in the history of marching band competition anyone has ever entered a dude carrying a boombox playing the output of a computer MIDI interfaced drum machine. I think a good audio engineer could produce a recording that technically sounds superior to any human powered marching band, but it misses the point of the greater marketplace its a part of.

You could model it as the ancient guild system and there's already an entrenched guild operating very successfully in the space.

(edited to also add, at the time, there were mechanical sources of music and they were the absolute bottom of the pecking order, only a total dive bar would have an "organ grinder" or literally a jewelry music box, so here's a nicer mechanical source of music, but mechanical music is bottom tier, and here you are trying to get the nicest dive bar in town to make a massive capital and labor investment, not gonna happen... A good analogy today would be, um, inflatable women are not seen as a high status symbol, household good, but supposedly AI will make something like the cult classic "Cherry 2000" movie a reality for better or worse someday, although the guy selling "Cherry 3.11" or "Cherry 95" or "Cherry 98" is going to have a rough time selling until Cherry 2000 hits the market, and no I'm not making this up there really is a legit cult classic movie "Cherry 2000")