Yes, that seems to be the case sometimes. Emilie Autumn, for example, was signed to one of the mainstream labels--but dropped them after they told her to make her music more mainstream. She's now signed to a small label, but has pretty much all the artistic liberty she could think of, and that's why her songs are powerful and beautiful.
Michael never played that game either, interestingly enough. Despite being a mainstream artist, he marched to his own drum, and that's one of the things which sets him apart from other famous mainstream artists. However, the fact that he was unwilling to conform to the stereotypes that Hollywood seems to glorify in film and music, shows that he was above being manipulated to earn money for the label. Whenever Michael changed his style of music, he did it on his own terms, not on what's popular.
I'm sure others have undergone things like that--for example, Ke$ha actually has a good singing voice and a great ability to write songs. You wouldn't guess it with all the autotune she does. Her demos and unreleased material, however, are a mix of good, meaningful songs, and more pop-oriented stuff [which seems to be what she's doing at the moment.]
The same can be said for Gaga, Rihanna, and others who sold out their music in favour of generic, thoroughly unoriginal dance/pop music. Most people don't realize it, but Gaga is nothing more than something thought up by the music company--the same can be said for Rihanna (with her 'bad girl' image), and others. To that kind of people, however, fame is more important than anything else, which is why their work sounds so plastic and soulless.