Why?,
I am glad someone has nibbled on the worm.
Yes, clubs are a business. They provide leisure opportunities for players. As you said, basketball is just one leisure pursuit and so if clubs want to sell their product, they need to market themselves properly to attract customers.
There is nothing wrong with wanting the best kids at your club and being strong. However, the issue is concentrating kids at one or two clubs and creating a shortage of talent at other clubs. Some kids (parents) are happy to play 5 mins/game as a bench player for Div 1 at one club, rather than 30 mins/game as a starting 5 player at a different club. You cannot change human nature.
However, the issue is that of byes in Div 1. A club with 50 kids in one group means the top 8 players (16%) are usually pretty strong. For a club with 20 players in that same group, the top 8 players (40%) usually means only the top 4 are pretty strong. It gets back to depth.
Therefore, if we don't want a bye in the Div 1, then as a basketball community we probably need to look at how the "weaker" clubs can become more attractive to players and attract the players they deserve. The best competitions are those with close, hard fought wins, not boring, predictable results. I say work as a team to raise "weaker" clubs up, not pull stronger clubs down.