That's just something you can do when you have a money-printer (Fortnight) and want to buy market share, I guess. Worked in my case—sorta—since I'd only ever have bought a couple exclusives and wouldn't have it set to start-on-boot if not for the frequent free games.
But, if I'm looking to buy a game, I still check GoG and Steam first, and if it's not there give a hard think to whether I really want the game, though. Which is why I've only bought two games. I'll even pay more, or defer until a sale, if Epic has it for cheap and it's more expensive on the other two services. The only price they're winning my "business" with is free (except a couple exclusives).
I dunno how everyone else is treating them, but for me, they've gotten me to leave it open and look at it pretty often, but haven't managed to get me to ever buy non-exclusives, so... partial victory?
There is a risk that a game or studio gets a reputation for giveaways/discounts which could canabalize future sales. Or the entire industry gets such a reputation. However, at least in this case, KSP is so old at this point, I don't think it is a major issue. If anything, the publicity probably will do more to boost sales of KSP2, then the notion that KSP2 may be free in 7 years.
Given the timing, I suspect Private Division views this as a marketing deal in advance of the February release of KSP2. Any monetary compensation they get is just a bonus.
Also remember this is suppose to be a loss leader. If they can get you hooked on a few games to draw you from Steam then you start buying your games on Epic and then they make real money
Hasn't happened yet and I've had an account for >2 years.
The thing is that even if they keep giving out free games, I still consider my Steam library to have the superior collection of games than what Epic has thus far given out. And since I like using the Steam client and the Steam store more, I don't see Epic Games closing the quality gap anytime soon.
Maybe this isn't a money play, but an attention economy play, in the short run?