Eh, if I ever need a real machine I would switch back to Linode. It's not very difficult and the support is astronomically better.
But it would definitely be to Linode's benefit to gank DO's $5 option.
It is so common there is even a term for it, 'Disruptive Innovation' [1].
The term is used in business and technology literature to describe innovations that improve a product or service in ways that the market does not expect, typically first by designing for a different set of consumers in a new market and later by lowering prices in the existing market.
Linode should have taken them seriously.