I think that a couple hours of design practice could be valuable to a designer regardless of whether he wins the cash.
Try inserting another profession into your sentence and see if it still sounds reasonable.
Here's one example from Google: http://code.google.com/android/adc.html
Here's one from Netflix: http://www.netflixprize.com/
The difference being instead of hours (or even days), programming contest submissions can take weeks or even months (and in some extreme cases - years) of work.
Engineers are subject to contests too: http://www.xprize.org/
They seem to be doing fine by me
You don't think the time spent on entries simply reflects the prize money involved? How much time would groups be putting into Netflix's contest if it was for a $250 prize?
Also notice how both Google and Netflix pay contestants along the way (Google giving $25,000 to fifty groups for completing the first phase, Netflix giving $50,000 each year to the group that makes the best improvement).
Those contests are legitimate contests. They are truly seeking creative and valuable entries. And they reward the winners with millions of dollars.
The "contests" at 99designs are just regular contract work where companies are trying to get as much labor for as little as possible.
these contests are the same as programming ones, the main difference being that the rewards and the time to complete a submission are lower
"Those contests are legitimate contests. They are truly seeking creative and valuable entries. "
So you're saying that creating a logo isn't creative and valuable to a company?
at the end of the day this is still about choice - something that you're ignoring