This is not a horrible idea. I might do it a little differently. A free service for non-commercial use and a paid service for commercial use (maybe $5/per CPU per month, $50/year, $150/lifetime). Combine with maybe a 50/50 distribution of income earned to FOSS devs.

That income earned might get non-commercial users to transition and drive mindshare benefits which would force some commercial users to switch.

People should always be free to build from source or even build their own packages, create their own repos, but the kids want native packages and providing more money to package software and make packaging super simple, and well supported for devs is a good thing.

The packaging that the major distros do is fundamentally a service, and I'm shocked this hasn't been tried before. Maybe people will rally around the idea -- the major distros should be compensated, if they compensate developers as well.