His parents are absolutely right. If he is majoring in something like film or music, he needs to be in the top 10% not to end up playing violin on the street or be a cameraman for weddings and bar-mitzvahs.

If he is not willing to put in the hard work and be good at it, it's just a waste of money. Now if he was majoring in Engineering then 3.5 would be good enough because engineers don't have to be top of their class to get good jobs.
Your friend might be looking at College as an experience, but his parents are looking at it as an investment. Maybe if he has to pay for it, he'll be more personally invested and take it more seriously.