When I was taking my BS the freshman class was packed. While the failure rate was probably on par with this report, many more of the students dropped CS not because of grades and I never saw them again.
Whether it was out of lack of interest or because it wasn't what they through it was (all I wanted to do was build a cooler Halo game) would have been interesting to know.
The effect was even more pronounced after Sophomore year. I suspect Data Structures and Algorithms, which I loved, but could be difficult to digest and may have disillusioned people with that CS or SE actually was.