As a tiny company, with a fantastic product, I'm sure Sublime has a lot of loyal customers who continue to pay for new versions.

Competing with VSCode is not really possible, or necessary.

I paid for it as a college student a decade ago. I literally did all my coursework in it, it felt like a no-brainer to throw some money at a company that made a great product that I relied on.

I think it's just a matter of habit: we're used to paying for physical goods, but over time we were accustomed to get digital stuff for free.