That is scary. Imagine what they are paying for the instruments to be able to offer such a huge discount....
We could never do this because of our low margins. Do the math and you'll understand why to stay clear of these types of deals. As far as the lessons are concerned, I see all the logic in the world to make such a purchase. It's a win win situation for a good teacher and a student. If the teacher is good the student will probably continue taking lessons at full price. 🙂
When I had time to give lessons, I always offered the first lesson free. I had so many students (raised my cost to $75/hr in the end) that I didn't have time to take on more and had to give up new students.