It also provides you backup which if you value your photos you'd have anyway.....so presumably if you didn't pay it to apple you would pay it to someone else, but with worse UX and integration.

Like, there is a value in what Apple is offering. It means someone like my mum never ever has to think about storage or backing up anything, when she lost her phone she got a new one out of a box, signed in and all of her stuff was there without having to do anything. As a power user, could you achieve the same for less? Sure, but for average user the value is there.