I suppose it's not a bad thing for you in the short term, but I'd caution against getting comfortable on the profit cushion, and reinvest in revenue sources that can't be taken away by the same opportunistic competitor.
The interesting bit is that I was just as skeptical as you are (and probably even more so) and in the end decided that trying it was the easiest way to see if it was true or not.
The second time I was even more skeptical but then I figured 'in for a penny, in for a pound', just to be able to tell Richard that he was wrong the second time. But he wasn't.
It doesn't hurt to try though, and if it does work for you then it's free money, which is nothing to sneeze at.
Keep in mind that if your product costs you $2 to put out there per paying member and you manage to increase your sales price to $19.95 you've just gone from a 50% gross profit margin to 90%.
Also, for consumers, $19.99 is pretty much a fixed limit. Above that, you loose people, but below, you don't necessarily gain more signups.
That way you can market to two demographics and cover the market. Extra bonus is that you can use essentially the same underlying tech.
Made gravy?