Out of the business? Developers „everywhere“? There was no mobile app business as we know it.
Jobs even said that applications would be coming - but be web apps, yes:
„Jobs does reveal that there will likely be additional applications that can be bought later and installed, but that this will be in a "controlled environment"
https://www.macrumors.com/2007/01/11/apple-iphone-apps-coming-but-limited/
Google had been working on mobile OS since they bought Android - though they did reshape the product after the launch of the (touchscreen) iPhone.
Sure, developers wanted and still want to create native apps with powerful tools (though I sometimes wish, they did focus more on cross-platform compatible web apps when appropriate. The easiness of the distribution and billing provided by the Apple App Store and its low entry barriers certainly were a boon to to developers at the time. That said, and going back to your original claim…
That is reframing it in a strange way.
Native apps and app development don‘t require a walled garden. And no one was begging Apple to make as restrictive their App Store policies as they are today. Or ask for a monopoly on app distribution for iOS, let alone prohibitions on promoting outside sales.
👉 And that is the crux of the issue today: It’s Apple’s totalitarian control over apps distribution.
Apple could allow sideloading with the current sandboxing, security and privacy model in place - just as they do on the Mac. They could allow app functionality within that model, such as emulators, other browser engines and external purchasing methods - and they don‘t need to pre-approve games when you sign up for an external game streaming service. And they don’t need to have a monopoly on app distribution for their mobile devices - just as they don’t on macOS.
Whatever Apple’s original plans and motives, they are asserting total control over everything today.