I think they are doing this more due to time than anything. Can you imagine how much work this project involves based off of the trailer we've seen of the Midgar gameplay... which is ultimately like, what... the first hour of the game.

I see this episodic approach as a way of getting large chunks of the game in the hands of players sooner. Sure SE will more than likely make a tidy profit out of it (much of which I imagine will get funneled back into the development of subsequent episodes), but I'd rather be able to play it sooner than have to wait 10 years (optimistically) to play the complete experience.

What I imagine is the first episode will have an option to pay up front for all the future episodes, or the future episodes can be bought individually at the consumers discretion. Much like the way Resident Evil Revelations 2 worked, where the cost of all the episodes combined pretty much amounted to standard retail price. Episodes will probably be staggered over the PS4/One lifespan and we'll more than likely see the "complete collection" as a bundle around launch of the PS5/XBOX4K.

Either way I think it's a bit premature to start throwing the toys out of the pram when they haven't even announced how many episodes there will be, or how much they will cost.