There's a difference between short- and long-term interest. People are bad at the latter. Yes, there's demand for a free game - duh, of course people want free games. And when they have to pay a euro to get the game to really progress. Sure, why not? And then they need to pay a bit more. And they are still fine with it. But they are less and less satisfied. They try the next game - and the same thing happens. For me the end result is: I stopped looking at games for my iPhone because I have a deep mistrust for apps. Most things that look high quality turn out to be terribly designed (from a game design POV) and are just employing one dark pattern after the other to get people to make more IAPs.

So, yes, short-term there's demand. There's a market signal that says "this is totally what people want". But mid- and long-term it's bad for the platform because it leads to shitty customer/user experience. It will still make companies money for a while - but the consumers are burning away. And it's really hard to recover from that.