Good points Mike.
However there are a couple of issues that relate specifically to the music industry that mean what you say is true, but there is a HUGE "but".
The music industry is notorious, especially these days, for providing a single strike and you are out. You may get a second strike if you are both very lucky and you reinvent yourself. It is almost like if you fail to totally score no one will dirty their hands with you. It can even be that way with a near potential signing. If EMI, for example almost signs you but doesn't, that can stop anyone else from signing you. sad but true. Gone are the days getting several chances at that level. I am not meaning getting turned down after sending in your recording, I mean getting to negotiations and failing. The same is true for signed and hasn't been successful with a release.
Can it be done, yes, but by then you have part of the industry not only not willing to give you a chance, but wilfully dismissing you.
Secondly, they may still be locked into a deal, but shelved. Many bands have found themselves in that predicament. Sometimes the band will get released, or they can buy themselves out of their contract. It also depends on what exactly was recoupable by the label according to the record contract. Being shelved had killed many bands.
For example, getting signed is a double edged sword. It provides an advance, it also gives access to money and resources bands don't normally get BUT many labels have only one A list signing (these days) who gets big budget, best of contacts, best of resources. The rest are B list or simply on the shelf. By on the shelf I mean the label has no intention of releasing their single or album.
Unfortunately on the shelf also means you are still under contract and cannot release music via another label or on your own! Often by the time you are free to pursue things you are a couple of years down the line.
Occasionally, very occasionally, you might find another label willing to buy your contract, or you may be able to raise funding elsewhere and buy your contract yourself.
On a good note, if you are free to pursue things on your own, and you are not crippled by recoupable money, then you can pursue making what traction you have left work for you. For many the lesson to be learned is as you say, you have made good numbers once, musically you can do it again.
Sadly, many bands don't learn much about how the music industry works. They want to focus on art, let the suits deal with something so uncool as business. That, is a great pity. To make a living from music, never mind being "successful" in the traditional music industry sense, takes being plugged into the business side and a lot of hard work on all fronts.