You don't pay an artist for his time, you pay him for his vision/creativity/etc...
They did get 4000 entries this year, but I saw a few in the running, and I'm guessing they got 3950 pieces of junk, 30 so-so and maybe 20 that were anywhere close to super bowl level.
There are a lot of companies doing poptent and similar competitions where you pay $10k and get a hundred options to choose from, but think about all the commercials on TV and all the poptent-esque competitions out there, it's the extreme minority. Less than 1%. Look at the superbowl even. Dorritos and Chevy (Camaro graduation commercial) had competitions, every other advertiser spending millions on their ads went with ad agencies and producers. Even chevy's other commercials were done traditionally (not a contest) . Again, I'm sure the companies don't see it that way. In a way, it's a risk. They're paying the cash no matter what they get, instead of working with a producer or ad agency (that in turn works with a producer) to craft exactly what they want.
Pro's and con's for advertiser and producer alike. That's why it's not the norm. At the rate they happen, I think they're great. Gives a lot of people a chance to do something big, makes the company look nice and friendly in the PR, resulting ads are usually pretty great!
That said, we didn't enter dorritos this year and probably won't next year because it's starting to be like winning the lottery. So many players, even if you have something great you have to win a popularity contest first, right? Poptent isn't as bad. Smaller prizes, less competition.