The gross $$s they make on CDs may be smaller than what they get for shirts and trinkets, but they definitely get more for a CD sold at a show than via brick and mortar, iTunes etc. I usually buy a CD if it's a new release, if for no other reason than to help me with tracking and labels. Plus, it's always better to get the liner notes etc. that you generally don't get with a download.
Its different at each/various professional levels....
But regardless - those CDs go on to be little marketing devices in the worlds where they land...particularly if they have any graphic production to them. Makes them more of a conversation piece.
I've seen new, upcoming bands just give away a choice live show. - Its sort of like "cloud seeding"
Seems like an inexpensive, per fan investment in promotion.
Giving away studio work is bit more of an investment, but I've seen it done.
Or - I've seen bands just ask for donation for a new studio disc.
But once you have enough fans, you should be selling...live or studio, you need to have that product at the show and available on-line.
But then, its a job(gasp!) - and the band has to be ready to manage that part...otherwise they just get lazy, forget the discs, etc...