You don't understand, it's just business.
Furthermore, the conversion of requiring people to beg via email to explain they're broke is next to zero. People won't do it. They'll take the POLR: fake accounts. Kicking them out also won't help: they can attack the brand and also if they succeed, the service looks like the bad guys. Furthermore, it builds stats by having more accounts registered on the platform. Whether those fake accounts get killed off is up to the business owner. Is padding stats worth the liability and cost of junk accounts?
We're still talking about DistroKid, so it just bought them free PR.
The point is everyone can make more money by taking a calculated gamble on positive ROI giveaways. The unit cost of an app is often pennies. Any concern about mass defection of paid users to unpaid is unlikely if the service is good and shows trying to take the high road. And that adds goodwill valuation to the brand. These intangibles make the service of higher value than a formulaic subscription service that thinks short-term only. It's not quite the same as selling gym memberships. :)
The meta is that when a service is small, keeping CAC low and getting as many users as possible while maintaining cool is hard. The churn between paid, unpaid and closed accounts is also a delicate dance to keep satisficing toward $. Sometimes giving accounts away in exchange for something non-monetary is a way go (real friends or not).
And also, don't forget gangster marketing: http://youtu.be/t73Q3f4YjwQ
It's probably less work for me to send an email explaining why I think I deserve a free account than to tell the system to send emails to five email addresses that route to me, and then do whatever I need to do to validate them.
Entirely true. But it would remove the conflict of offering the scholarship option only to people who cheat, which is the whole point. They can of course continue to also offer it to those who do, just like now.
In my experience, this works until a user hits a moment of hardship or "meh". Then they cancel and find it's easier to reallocate those consumption dollars to something new than reboot the subscription.
Perhaps, instead of explicitly mentioning the Scholarship accounts on the homepage, there could be text along lines of "Struggling to get by and can't afford it? Email us and we'll see what we can do."