You're wrong. There's plenty of bands out there playing their own songs from the ground up. You won't hire them because they probably don't draw or hold a crowd as well. If you were truly a patron of the arts, as you are posing to be, you'd let em come in and play. But you run a business, which is why you hire cover bands, which is why you get to pay like everyone else.
Maybe in college towns or big cities, but not out here in the rural east texas. The one local band from this area ZZ Top played cover tunes too, when getting started.
What would be the liability if one should sneak in some covers?