The organizers are well aware of this, but they're cynical. They want the money. I don't enter them, and I don't judge them. And some of the fees are highway robbery. Further, Peters feels that contests are contributing to the death of literature.
Contests are also a form of censorship, a way of putting literature on an approved list.
They perpetuate an academic style that judges can agree on, and they never select anything dynamic. Felix Singer, of Denver, Colorado, disapproves of fee-charging contests so strongly that he says he has forfeited magazine publication and four opportunities for a book contract because he refuses to pay in order to be published. But contest administrators disagree. The truth of the mater is that the Press loses several thousand dollars on the prize book every year, and that figure would even be even higher if we counted donated labor and in-kind salaries. Betty Kray, the former director of The Academy of American Poets, says that the fees The Academy charges for the Walt Whitman Award, a first book competition, go primarily to pay screeners.