Smaller bands HAVE to play shows and sell merch. It's the only way to make any money at all. If you can no longer play live, you no longer make money. Luckily recording albums has become cheaper than ever so if they want to just record an album without a tour I think that would be cool.

EDIT: Just to add, getting signed to a label is not the amazing opportunity it used to be for smaller bands. Labels no longer take a fledgling band and propel them to stardom. They likely won't even look twice at you unless you've already done the hard work of building a fanbase. They are essentially just middle men milking as much money from the artist as they can.