Firstly:
Before, you could get "up to 12k emails per month" for free.
Now, you get 2k free sends once (for dev), and then have to pay $9.95/mo.
This all sounds actually great, so far (although, I think $4.95/mo would have been a better bottom-tier plan - the goal is to get rid of users that don't pay anything but send 12k emails per month). $9.95/mo is affordable to any startup, and it's sustainable (vs paying accounts having to cover the cost for the hundreds of thousands of users sending millions of emails for free).
The mistake they made was in doing anything else besides this. If they had simply changed the pricing like this, but left everything else alone, they would double their profit in 5 minutes while only pissing off the customers that aren't ever going to pay anyway.
Instead, they did what they did, and now they're no better than TWTR.