> Practically speaking I think it must have been the latter.
This assumes music was made as a performance. Music can be (and i argue probably mostly was) people jamming together. Musician and audience are blurred in this scenario.
Agreed, that's my experience growing up in a family where we regularly sang songs together casually as part of parties. It was less about listening to one performer and more about being part of the performance. Same still happens today with things like choirs - people are in it for singing with others, not for the eventual public performance. It's a very social activity.
This assumes music was made as a performance. Music can be (and i argue probably mostly was) people jamming together. Musician and audience are blurred in this scenario.