I would say this is independent of TF2’s overall player base. There’s pretty clear cutoffs in comp leagues where teams evaporate. I’m not sure what it is in HL, but in 6s there was 40+ teams in the free division (AM), 9 teams iirc in the first paid division (IM), 10 teams in main, and I don’t remember the rest.
IM bottlenecks the movement of players to the rest of the divisions, which is really bad. Teams have less choices for player and players have less choices of teams. Which means your far more likely to get stuck with flakey player, toxic teammates, people who make it outside of your control if you do well or not and lead people to quit RGL 6s.
The problem is people don’t want to pay to play competitive. So either leagues need to get rid of the fee or they need to make people want to play in higher leagues.
I’ve thought that making divisions free but having a league fee to earn the medal would be an okay system, but might have its problems. The other idea I had was to move up podium placing teams (currently only 1st moves up) and waive their league fee for the following season. That would triple the potentially moving up players each season, and remove the reason that a lot of people just sandbag on off classes after winning a season.