That's one way to look at it. But they need to make money somehow and I'd prefer this to advertising or selling my data or trying to convince me to make my life publicly accessible online.
I mean... wouldn't their ideal lock-in scenario be if everyone was free to store gigs upon gigs of photos for free so they pretty much HAD stay in the Apple system or suffer the inconvenience of downloading it all and putting it somewhere else?
Yes, because their profit margins are that low (!).
Considering Apple charges you £500 for a phone and £1000 for a laptop, I'd expect a bit more in terms of default cloud storage. 5 gig (and the 16 gig the cheapest iPhone 5S model offers) are incredibly stingy.
Apple doesn't need this money, just like they don't need the ugly user experience when an iPhone's account gets disconnected from its credit card.
But Apple's culture of nickel and diming for everything has to do with training users to pull out their credit cards. The more often a user hits Pay the easier it is to do it the next time it comes up. As long as the user keeps pulling out the credit card the experience is smooth and makes the user feel like they are part of an elite higher class.
In other words, it's deliberate consumer brainwashing.
For pictures below 2048x2048.
Also I'd rather pay for storage then expose my data to web app automated algorithms and lack of local editing software with two way sync.
5GB of storage for every Apple user comes to hundreds if not thousands of petabytes of storage that Apple are providing for free. Calling that "miserly" seems awfully entitled to me – you're essentially complaining that Apple aren't giving you enough stuff for free.
Besides, Dropbox has way more coverage and is offering 16 gigs.
Apple has $150 billion in cash, so it's not an infrastructure issue.
The core is probably that they don't "need" to offer more, so don't. But that doesn't mean we can't ding them for their behaviour
Dropbox's advertised free tier is only 2 gigs: https://www.dropbox.com/plans. There are some referral games you can play to get more, but I doubt many people end up with 16 gigs (I'm at 4).