There are daycares / studios / private kid sports leagues that just send off a bad vibe. You get the feeling that children are seen as numbers and quotas for income (because they are) and that it's all business.
My daughters' dance studio feels more like a school than a for-profit business, and I think that's because the owner is a former director of a performing arts school. He was a dancer, then he spent the rest of his career teaching dancers at a good salary, and now he's still focusing more on the classroom than the money in his own studio. His goal is to have 18 year old dancers who can walk into an audition in NY and be 100% prepared to nail it and know exactly what they are getting into. He hates dance competitions and thinks they are ridiculous--real dancers are hired, not winning a trophy for a studio--but he shrugs and offers a competition team because the Dance Moms want it. He's on the Dance Masters board, and he knows how the game works. No one ever gets lower than "high silver" no matter how much they suck, and "high golds" are tossed around easily. And he laughs, because none of these kids can put their studio competition team "wins" on their professional resume. It's a studio money maker--period.
Contrast him with Becky's Dance, where Becky is a former high school dance team captain who also danced at her local studio, took a few college dance classes, and now is starting her own business. She needs at least 10 kids in each class to make rent, and more like 15-18 to make it profitable. She pushes her students to recruit their friends and enter lots of competitions, and she plasters the walls of her studio (and the local paper) with these competition wins. Parents (and kids) see the trophies and want to join the "good" studio. Becky builds her reputation, her studio, and her income by riding the competition circuit.
As a parent looking just at 1.) the money, and 2.) the slim odds of my daughters becoming ballerinas, I could see this whole thing as a GIANT WASTE OF FREAKING MONEY. Instead, I look at the side benefits.
1. My girls are being mentored, taught, encouraged, challenged, and stretched for $10 per hour. If I hired a babysitter who just sat on my couch and kept them out of trouble, it would cost just as much. When I look at it that way, my dance studio is a bargain.
2. They have a consistent group of friends that are outside of school. When middle school drama hits and BFFs change, my girls still have their dance team mates. They also have their teachers, who know them and genuinely care about them. If my girls are dealing with a problem that they don't want to talk to Mom/Dad about, I like knowing they have a support network at the studio that they can turn to.
3. Every hour they are in their activity, it's an hour away from their bedrooms and phones. Have you read the Atlantic article about today's teen behavior? The charts and graphs are eye opening. Kids need to get up, get moving, and interact with each other without a phone in their hands. Dance is a built in (and yes, easy) way for me to make sure they aren't vegging out for hours on end. Otherwise I'd be begging, enticing, prodding, and punishing my kids to put the screens down and do something else--and frankly, that's annoying and exhausting. Again, $10 per hour for a class they are happily looking forward to is soooo worth it to me.
As for what's driving these crazy prices and push for kids to be in SOMETHING, my studio owner would flat out tell you it's the parents. My theory is that many of us (including myself here) use our kid's activities as Family Entertainment. We're the Dance Family. (Or hockey family. Or swim team family. Whatever.) We spend our weekends at the studio, we know lots of dance terms, we look forward to the next performance and talk about who got what part, we compare and contrast our kids and ourselves to the other families, we make friends there. It's our community. We used to be in a community with our neighborhoods or our churches, but now families gather around Kids Sports.