One minor thing to consider is that hobbyists weren't distributing the source code (as posted in the OP) but trading the paper tape of the executable interpreter. They wanted the interpreter so they could write their own software that was probably unrelated to basic itself, that was just a means to an end.

The industry pretty quickly moved to incorporate basic in rom on many platforms and microsoft was able to capitalize on that integration through licensing. I don't think his letter did much other than antagonize hobbyists - but they made a lot licensing to the hardware manufacturers later on (and the hardware was truly more valuable with basic on board.

(One of my all time to this day favorite computers from that era is the TRS-80 Model 100. I don't remember if Microsoft provided the entire software stack for it, but I believe it was the last product that Bill Gates actually contributed to the software development.)

According to Gates, he wrote the Model 100's software himself. It was indeed his final major software project as a coder.

Licensing programming tools was staple MS, since it also provided lock-in. The letter comes off as the complete opposite of open source approach to it.