It seemed OK on paper, though. :/
Yup. They implemented the model terribly.
At this point they should just scrap it and go to a KI or MKX style DLC-only model. Keep the balance/system updates free to maintain the player base, drop the price of costumes to previous levels so they sell more, and make characters DLC only. Maybe even let one be free on a rotating basis, or maybe just for the first week after release for people to try.
The whole in-game currency idea has pretty much killed the game so far. It led them to horrible design and game management decisions, and look at where we are. Even many of the most die-hard SF fans are disappointed by their handling.
If people complain about no longer being able to get free characters, too bad. It's obvious the plan is hurting the game, and they'd just be at the same place as other fighters are in right now (KI, MK) with continued support and a sustainable model that people feel is totally reasonable even without totally free characters.
A regular SF4 update was like $25, wasn't it? The seasonpass was $30 and close to the end of this season it was already on sale for $15. Since you can easily get 500k-600k FM (I have that much, bought the seasonpass and finished survival only on easy with every character, normal with 2 characters, nothing else in that mode), you are set for 2 years or 12 characters for $15-$30. For anyone who wants to jump in at the end of a season with the complete roster of that season, the game + seasonpass bundle was also on sale recently for 35 in the EU store. That's pretty reasonable.
I honestly think that's better than what SF4 did. Especially because of the smaller time in between the updates. A character each month is fun, imo.
The other reason for this change was to keep every player in the same version at all times, since balance updates were also locked behind the new releases of SF4, probably to justify the price / new physical release. I don't think this would be a problem though, they could just still get the balance updates rolled out to everyone to keep a single version of the game, just with payed-only DLC characters.
I actually don't see too much of a problem with the system itself, I even prefer it. The biggest question will be wether the next seasons will provide enough FM to get a reasonable amount of new content for free.
Edit: Personally, once the characters for season 2 will be revealed, I will be able to decide how many of tjose characters I actually want and can then chose what other type of content, like stages and costumes, I want to get with my FM.