It's one of the mentalities you'll find in that space. Not all consumers are price-sensitive to $5, and the ones who aren't are probably the ones you want more anyway.

While I think halfing the price might be a little too much (for starting out), I think selling a year for 39.99 would probably be viable. Charging much less than 5 as a minimum payment doesn't sound very sustainable wrt expected churn, payment problems etc. I may very well be completely wrong, though.

Also, don't ignore the value of "choosing" the best customers -- those willing to pay, and willing to dedicate some resources (exemplified by paying a premium). If you build a good "community" of users, they will affect new users later -- by being an initial majority.