That argument is true for Visual Studio. Not VS Code, which is Microsoft's "rewrite moment". Visual Studio is targeted at Windows apps, which you have to pay Microsoft to use. VS Code is targeted at web apps, which people run on Linux. The revenue impact is highly indirect: it's not like people will write more web apps than before now VS Code exists, somehow benefiting Azure.
They could try to do a reverse JetBrains and introduce an enhanced for-pay version. Supposedly they're already starting to do that with Python support, it seems. But starting commercial and going free is a lot easier than starting free and going commercial, in terms of user loyalty.
They could try to do a reverse JetBrains and introduce an enhanced for-pay version. Supposedly they're already starting to do that with Python support, it seems. But starting commercial and going free is a lot easier than starting free and going commercial, in terms of user loyalty.