I think it was a bit of both. Before the 1990s, Muzak especially liked to play up the contrived "scientific" and psychological aspects of its music service, pitching it as specifically being programmed to get people hyped up to buy or work. Muzak were always really good at funding studies that proved the point their marketing heds had decided on ahead of time (e.g. see the rot about their "board of scientific advisors" in the liners of some of the earlier Stimulus Progresion albums). Starting in the 60s they had begun implementing quarter-hour blocks of silence, reportedly to maintain the positive stimulation listeners had received during a quarter-hour block of music that would increase in intensity throughout the course of the programme. This, naturally, had nothing to do with the fact that by splitting the programme into quarter-hour blocks, they could provide a lower-key programme for stores, offices and restaurants and a more upbeat, brassier programe for factories and upbeat restaurants without having to licence separate 67 kHz carriers in each market (92 had not been approved until the early 80s) -- an early attempt at multicasting. The receivers would incorporate a timer or listen for cue tones transmitted between programming blocks. Certain facilities, like hardware stores or pizza restaurants, could be set up to receive the full programme service by simply disabling the receiver's squelch outright.
Some smaller, primitive music services did exist in a few areas, which were simply conventional automated beautiful music or MOR FM stations that would transmit cue tones to mute the receiver during announcements and commercials, either in-band or on an SCA, but the music itself was just the station's regular audio that everybody else would listen to. During the Muscio era, Muzak used to love to sue these operations into oblivion, because competition is bad for consumers and the market in general. Portland had such an operation at one point in the 1970s, I think using KXL, but Craig Adams would know more about that than I do.
Nevertheless, in some places the local Muzak franchise would actually go tits-up and be replaced by a Seeburg 1000 or Canata-based outfit at the local CO or (by the early 60s, when SCA had completely replaced telephone distribution) on-site at the local FM station, replacing the Muzak reel-to-reel players. Seeburg even had a timer-controller mechanism (SABMC2) that would run a 2- or 3-gang rack of 1000s to imitate Stimulus Progression, keeping up the silliness that Muzak's marketing department had created.