I don't understand why reddit didn't respond to the initial criticism by decreasing the pricing/demands and just slowly implementing what they want over time. Doing it all at once seemed like a silly move.
Also running a paid API service actually requires providing services to the third parties that are using them (like billing dashboards, etc).
I'm pretty sure they didn't really think this through entirely when they proposed it. Now that they kind of have a better idea of what they're getting into doubling down is just hubris.