What's the end game here for reddit? There's no way this would end well.
What do you mean? How can this end poorly? Most people browsing Reddit are addicted with no viable substitutes. Breaking their addiction through continued blackouts would end badly. Replacing some mods no user cares about will hardly have an impact. Lets be realistic.
That said, I do think Reddit Inc. can solve this without having to "give" too much ... in fact, I think Reddit Inc. could come out BETTER off if they go about this the right way.
Fundamentally, that way is relatively simple and should be easier for them, as well - basically, showing communities, mods, etc. some basic respect. No more dissembling, no more misleading / outright incorrect communication, no more "royal edict" tone in decisions - and, ideally, just the most basic overtures to involving 3rd parties that have HELPED the platform grow and thrive (regardless of whether they've benefitted directly financially or not) ... some basic cleanup of PR and decision-making processes would be very helpful for all. Hell, even a simple apology for some of what has happened - no one needs to be "wrong" for that to be the case. And, I don't think there is any particular person or party that is right or wrong, here. Just terrible communications and decisions, probably "distributed", realistically.
If not, the platform likely isn't going off a cliff, but it'll be a shell of its former self and likely enter a classic decline a la LiveJournal, Tumblr, etc. This may be likely in any case, but they hardly need to guarantee it before they've even IPO'ed.