Reddit doesn’t pay them anything, doesn’t even offer premium at a discount or anything.

But it offers them a tiny bit of power, via being a internet janitor. I'm certain that there's a decent amount of people who will jump at the opportunity to become a moderator of a large subreddit. They are obviously the worst people to wield such power - just like anyone in the real world who seeks power is least likely to use it for good.

Moderation will be low quality, but it will remove spam. As long as the content mill keeps running all is fine. Users of the tiktokified official Reddit app won't even notice a thing.

At least it'll fall apart entirely once they appoint kids who desperately want to be Reddit mods after no one else will do it. If they want to run every subreddit themselves, they can, but it will only hurt them immensely.