I don’t know about the specifics of the business to intelligently critique your calculation, but it couldn’t possibly be the case that somebody turned down an easy million dollars a month, right?
If I was to guess, the standard indie hacker thought is happening "I can't raise prices" and "lots of people don't want to pay". When they're seeing 90% of their user base say I'm not paying that, it's easy to forget the 10% that would. The 10% that would probably haven't even spoken up.
And there is also probably a part of him that doesn't want to be greedy. But is it greedy to sell your software for $5 a month? I don't think so.
Is the 10% based on anything (I figure this is Hackernews so it is non-zero chance that you or someone else knows something about conversation rates for these kind of apps). My gut thinks it is high but I have 0 experience.
10% is a low estimate based on conversion rates I’ve seen people post on conversion rates. Standard apps with freemium the rates are 1-10%, Reddit however is used a lot so a mobile app will be used daily (900,000 daily users out of 1.2 million overall) it already converts at 1.50 a month. It would be somewhat reasonable to think Spotify-conversion rates of 30% would convert.
And there is also probably a part of him that doesn't want to be greedy. But is it greedy to sell your software for $5 a month? I don't think so.