This is one near us--the botttom of the article mentions that this band has scrolling lyrics on a monitor and is working on patenting a system for it. They have 200 songs.
http://www.newsreview.com/reno/step-up- ... id=1900694Where we used to live, there was a successful live band karaoke going at a small club that was quite successful for several years. The band was headed up by Merle Haggard's drummer which gave it some extra credibility.
I have never tried it but my boyfriend recently attempted it when we were checking out a jam session/open mic show. The band members knew we did karaoke and that the boyfriend didn't play an intstrument so they invited him to participate by singing. They didn't advertise themselves as band karaoke but were mainly a jam session. But they did have a list of songs they knew and if you wanted to jam via singing one of them, you could. No lyrics were provided. Boyfriend forgot the second verse but had a great time.