It's not even that; those services were subsidized by investors money on this idea that once you get a user base, you can then capitalize on the user base.

Those promises were made at a loss which later had to become a profit. It's like Discord, there's no way hosting literal hundreds of thousands of servers for free and killing all the competition can and will continue indefinitely. I wouldn't be surprised if their monetization gets even more aggressive because transmitting all of that audio and video is not cheap.

That's not even a "capitalism" thing, that's just a "someone's got to do the work thing" and the majority of gamers went "yup that somebody can not be free!" And what always happens does, the existing solutions lost tons of revenue and became increasingly stagnant because they can't compete with "free".

That's why I've started paying for stuff (even when there's a "free" option or paying more for domestically produced goods -- even when there's a "cheaper" option). Cheap isn't cheap when it comes to manufactured goods (i.e., cheap imported junk), and free isn't free when it comes to online services. Ultimately, somebody's gotta make "free" happen (even if it's a government, and then that really means the tax payer).

The race to the bottom only exists because that's what people vote for with their wallets. If it wasn't rewarded with sales, it wouldn't happen.