In general, they do not. They allow domain investors to be a channel partner by getting domains into the hands of end-users within the first year. With a cheap 1st year deal, a domain investor can buy a lot more inventory for the same at-risk capital, and have a greater chance of recovering that capital while also having upside.
For example, we saw this in a big way with .CO in July when we sold a lot of .CO at $0.99 and heard many success stories --
see this thread. It is great when registrars can secure aggressive pricing from registries. It is a win-win when the domain investors can also bundle the domain with strategies for getting that domain sold or leased quickly so that it becomes a retail domain which can be used in commerce.
The exception to this statement is TLDs that are heavily used by spammers. I won't name TLDs out of respect for the registries, but there are some TLDs that have a higher than average concentration of spam use-cases, precisely because they were cheap.
When high quality TLDs with decent after-market prospects go on deal, I would say, it is a good opportunity to back up the truck. However, if the TLD has an inactive after-market, then the people who will be buying those domains in bulk will skew towards spammers and people who run content farms for use with disposable lead-gen or traffic arbitrage with nearly 100% of those domains getting dropped..
