The only reason it's $500k and not $0 is to save a small amount of face. Digg is losing money, and has never made money in its entire history, so it's going to cost Betaworks a lot more than $500k to take it over.
It'll still cost more than $500k to transition the service to whatever it is they have in mind. It'll probably cost more than $500k just to trim Digg down to size.
1. I don't think that people, working all hours, are actually significantly more productive than those working regular hours. In fact, in knowledge work, there's good evidence that you only get two or three hours of real productivity per day, no matter how long you keep banging your head on the keyboard. 2. Even if reddit developers and staff were twice as productive as Digg folks, that only indicates that Digg had five times too many people (instead of ten times too many).
It's probably a brand they're slapping onto something they already have in the works. How is it going to cost them a lot more to take it over?
Legal costs. Infrastructure costs. Clearing out employees and transitioning with new employees to take over and operate it. New product development to change the product into whatever they have in mind.
It's ridiculously easy to blow $500k doing nothing in tech when salaries run $100k with total compensation. And that's just the employee costs.
It'll cost Betaworks several million dollars to get Digg the way they want it, all in, including the purchase price.