This article is from the Stand-up Comedy FAQ, by Steven Rosenthal and Steve Silberberg (firstname.lastname@example.org) with numerous contributions by others.
A. At one point there were too many rooms and not enough headliners. So in
order to put more money in their pockets some rooms decided to start
headlining people who weren't headliners and that had 50 minutes of time
killing material. Instead of hiring comedians who can kick ass but demanded
The audiences noticed the drop in quality and recognizability of the
headliners and quit coming to these clubs. So, some ever smart clubowners
decided to "Paper" the rooms which is letting people in for free and living
off the drinks alone. This is called a saloon. Once they got rid of the
cover charges they CERTAINLY couldn't afford the better comedians. Hence
they dried up and died.