It's by far not a bad pirate encounter.
A 1 million demand is very low, and you should just pay (if you haven't just restarted the game and you are making money in penny).
If you move, you will always be killed.
So your best bet is: roleplay, roleplay... and then either do what they say, or shoot/run (and likely die).
In Disco, expect more demands of up to 10 million, or "drop cargo" - so you should be happy with low demands. And they even typed full sentences. So... ye. Not a bad encounter at all.