I’m not sure what Reddit’s rationale is here. Third-party app users are less than 1% (can’t find the link where I read this). The most plausible explanation is that they want to get rid of a potential future threat, because I don’t believe that current third-party usage constitutes any substantial loss. Otherwise buying out Apollo as mentioned in TFA should have been an easy decision.

You assume they act rationally. As mentioned in the post, the API costs are orders of magnitude more than the expected value from an average user.