The local rock station in Nashville where I grew up played local music every Sunday night at about 10pm. Which I’m pretty sure was the time they had the least listeners every week. Sometimes a local song would get popular enough that they’d play it in the regular rotation, but not usually.
They are in the business of making money from advertisements, as others have said.
And
A) people like what they are familiar with already and
B) A significant amount of local bands suck, which is why they are still local bands.