Free crap in other areas (such as computer graphics) did not win over purchased quality. For example graphics designers even choose their Operating System based on available (non-free) quality software.
However the issue with Delphi was really that Borland got greedy around the turn of the century, started chasing enterprises and jacked up the prices considerably. Turbo Pascal originally costed less than a game yet you got both one of the best compilers and a book to learn from and Delphi until around 5 or 6 or so (do not remember the exact version) could be bought for around $99 at its cheapest version (AFAIK upgrade was cheaper) which was still affordable even by highschool students and provided a very high quality package. And during the 90s Borland Pascal and Delphi had a TON of mindshare - something they lost as they moved away from being affordable to everyone.
People wouldn't mind much if Delphi wasn't free as long as it was still affordable to everyone and good quality. Sadly not only it became unaffordable to the most important segment of programmers (the new ones who want to experiment with stuff) but it also degraded in quality.