Yeah, this is true. And 3 years may seem like a long time, but it isn't really. We've been playing for about 8 years in my current cover band and it's only been the last few years where we have more than friends and coworkers as fans. Friends and coworkers are a good starting point for sure, but you do need more and it takes time.
We struggle with this one. It's hard to cover some popular artists these days because stuff is so "produced" now. We are good musicians. We have good gear. But the programing it would take is just too much, or at least more than we want to do. We manage to pull off some of the easier new stuff - Shake It Off for example. Fortunately stuff like The Middle, Mr. Brightside, Shut Up and Dance still seem to go over pretty well, as do "classics" like Pour Some Sugar or Kick Start My Heart.
Depending on the gig, a good set list can be hard to come by.