Having more players does help an MMO make more money though. IT's free word of mouth advertisement. Friends try to get their friends to play and each person playing the mmo might spend money in the cash shop. You have all the people who are paying money and subscribing now, plus you attract a bunch of people who might spend money.
Also, no one wants to play a "dying" mmo. While WoW is far from dying empty servers, deserted auction houses, and long queues can certainly give that impression. By attracting free to play customers you will have a population boost on realms and ensure people have other people to play with. Free to Play is genius because it subsidizes those customers who aren't willing and increase the game experience for everyone.
I think a lot of people in this thread are really unaware of what else is out there in the MMO market. There are a lot of very high quality free to play games that are not "pay to win." Arguably WoW is "pay to win" right now since you can't even play if you don't pay, and if you can't play you can't win.