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A super-slick produced demo may even dishearten/frustrate a pro-singer that can not make a better presentation of it for release...
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I've certainly never heard of this happening. However, I have heard plenty of stories about demos that ended up being finals (usually with new lead vocals on them). Christina Aguilera's "What a Girl Wants" was this way.

However, as someone who does produce and arrange a lot for unsigned artists, it seems to me that most people who listen to a demo will not have the musical imagination to hear in their head what a song will sound like once fully produced.

While a great song MAY get picked up from a simple guitar/voice demo, it seems to me that some creative producing and arranging would make a song stand out from the hundreds that cross someone's desk every day.

Of course, this may be less true for some genres than others. A simple recording will work for Norah Jones, but can you imagine a piano/voice version of Usher's "Yeah" selling very well?

Dave Hab
www.DaveHab.com