The music industry and disruptive technology

Inspired by a presentation I heard about the music industry today:

Unless you have been living under a rock for the past 10 years you know that the innovation of MP3's have creatively destroyed the music industry. Analysts have continuously criticized the music industry for not adapting to the changing environment. In retrospect, it's very easy to consider the outcomes and make a judgement as these analysts have done and don't get me wrong, I believe the analysts were right but what is the argument for the music industry?

Like any type of disruptive technology, MP3 technology entered as an inferior technology to compact discs. It sounded worse, many of the songs were cut off, and the volume varied from song to song. Consumers who were used to CD quality music would never put up with the lack of quality. At the time, it was debatable if this technology was really disruptive in nature.

However, the music industry lived in its own little bubble. They neglected to consider the ecosystem they were in. The IT infrastructure was growing and was easily able to support the new technology, more and more people were becoming comfortable with the internet, and college age kids were willing to put up with poor quality to get something for free. As the quality got better and more companies entered the market, the problems MP3's once had were diminished and there was little reason for individuals to buy CD's. So they became the proverbial "frog in the boiling pot."