While you might be right, super fucked up if their users care more about third party apps being killed than their long past acceptance of child exploitation.
I am not absolutely certain that this will produce a viable competitor but I would give it better odds than anything else in the past. It is not only a direct, immediate hit to the enjoyability of being on Reddit for any reason: it also heralds worse changes to come. Deprecating RES and old.reddit is the next natural step.
Honestly I would say that apps like Alien Blue and later Apollo made the difference in making Reddit as big and durably popular as it is now. Killing them, especially so visibly and messily, will cause an immediate exodus of some app users and a slow drain of the others. It certainly will not grow Reddit.
You need enough power users to sustain interest, post content, and launch it.
The goal shouldn’t be to replace Reddit as it exists today, because if you go down that route you are doomed to repeat their mistakes of constant growth at the cost of everything else.
Tha dam will burst, it's not a question of if but when. It's a guarantee from the ever declining quality of reddit.