Right from the start, when Karen responded with >$149 to enter a contest is cheaper then self publishing< I was confused. What did one have to do with the other? Did this publisher expect a lot of submissions by Authors that do self publish?
It all becomes clear however, once one see's the contest is only open to writers that have not been published. Certainly there are many writers holding a manuscript in one hand, a file folder full of rejections in the other who, rather then moving on and writing another, are considering self publishing. It's these rejected stories and rejected writers the contest is designed to appeal to. I do think the publisher knows what they are doing with this contest, someone in the industry this long is not that naive.
There are no substantial costs involved in putting out an ebook for a publisher and I will assume the contest fees will be used to pay the winners and what little it does amount to in setting up the ebook. A portion of the entry fee's may well too be used, as Karen says, to pay the judges (though I personally feel judges should NEVER be paid, an honorarium after the fact might be fine)
I would feel much better if this were open to ALL Authors/Writers published or not and, after all, doesn't a real publisher want the BEST submissions possible no matter whom they come from?