Octave also never had the span of toolboxes that MATLAB had. With MATLAB, you could always find fairly usable toolboxes that covered most engineering computation needs.
Octave was on par with MATLAB on some fronts, but it rarely exceeded MATLAB capabilities. And it was worse than MATLAB on tooling maturity. People hate The Mathworks for charging an arm and leg for its software, and for breaking backward compatibility, but most people will admit the MATLAB environment is pretty polished and seamless compared to open-source offerings in the same space.
So far no one has mentioned Scilab (http://www.scilab.org/). Scilab is a much a better MATLAB alternative than Octave, though Scilab code is less compatible with MATLAB that Octave code.
And for some reason, it was virtually unknown - Octave is superfamous compated to FreeMat.
I remember when I was in university students were acutely aware that tools like PhotoShop, Microsoft* and MATLAB were used in businesses. I doubt this has changed.
Even if superior Free options had been available, many of them would still have opted for the "safe" proprietary options because they wanted to be sure they could get work and felt (rightly or wrongly) that it was important they could put the right product names on their resumés.
Most people are goal-oriented when it comes to using software, not ideological, and they'll go with what gets the job done with the least amount of effort.
The GIMP-over-Photoshop argument should be because it does something Photoshop doesn't (very possible with its ecosystem of plugins/filters -- for example a "smart remove" plugin was around for quite some time before Adobe made their own and spent who knows how much in marketing/demos for it) or because the artist wants to save money.
Agree that people are goal oriented. OSS that's free-as-in-beer can help drive adoption on account of being free, but ultimately the best OSS succeeds because it's better than its competition in important ways. Pure clones are risky, I'm glad Gimp doesn't try too much to be a clone.
Sadly most artists who want to save money just pirate, which is what led to the terrible Creative Cloud situation. But that led to Affinity which seems to be a solid, buy-once (for cheap!) replacement. I agree the monolithic nature of Adobe is bad for everybody but that's not a reason to choose a subpar tool. Also people can write and sell their own plugins for Adobe products as well.
Anyway I think we're mostly on the same page.
That said, the world has become more accommodating in other ways. Python and R are now more well-accepted signals for data skillset than say, SAS. (exceptions: finance, pharma)
Anyway, my thought on why numpy seems more widespread is simple: efficiency.
Even Matlab code gets rewritten if it needs to be used for something intense, and Matlab has many more optimizations than Octave to get away with sloppy coding. Python+numpy is pretty easy even for a non-programmer to write (at least compared to C++ or whatever a DSP wants you to use) and even sloppily done is generally fast, plus it has a great and large community. But both Matlab and Octave are great (at least if you use octave-forge) for prototyping and doing a lot of domain specific things python/numpy/scipy don't support out of the box. Matlab especially has a lot of neat GUI helper tools. Meanwhile R is over in its own world where if you're doing anything in that domain it's a questionable choice not to take advantage.