Seth Godin posted this a couple of days ago:
In industries under siege from external change (and I count music, books, airlines, pharmaceuticals, IT, telecommunications, etc) you’ll find that the extra fees extracted by the legacy companies DO NOT go for quality. They go to prop up the status quo.
That’s why CDs cost $18 and why Jet Blue is the best airline in America.
As readers of this blog know, I’m not a big fan of pricing in the airline or music industries. When you are the only game in town, there is certainly some short term consumer surplus that you can extract, but it leaves people rushing for the exits as soon as they see one. Part of the problem is that when formerly innovative companies (airlines and recorded music were not exactly big business for most of human history) get big, they start working to perpetuate themselves, rather than focusing on the customer needs that made them successful. This has always been true, but with global competition, companies need to focus on the value and the quality if they expect to maintain pricing power.