There were absolutely paths forward that would have worked to allow 3rd party apps without price gouging them. The whole thing was in bad faith and they never wanted to allow 3rd party apps at all, they just didn't want to announce they were kicking them off the platform. It wasn't just about the money, it was about control. Control over the users by forcing them to use their app where they could push unwanted content on you and degrade your experience to maximize profits. The 3rd party apps made money by providing a better user experience which was directly counter to their aims to maximize profits.

3rd party apps did not make a huge percentage of the user base, so why were they so afraid of them? I think the answer is that they are planning on making the user experience on the main app much worse and they know users would be looking for alternatives after, so they went out to kill the alternatives, or charge them an insane amount.