These tournaments end up profitable because of the REC teams that get in, and that's fine. I'd rather have lots of tournaments to play in than not.
However, there are ways to balance things out. Forcing teams to move up doesn't always work as I've been on several teams that basically disbanded when forced up because a few guys on the team didn't want to step up.
Been playing for a long time and I remember back when i first got going the prize packages were better, but you could definitely use that as a reason to play up.
REC - 1st gets Money Back & T-Shirts / 2nd gets money back / 3rd-zilch
Bronze - 1st - entry fee x2, T's / 2nd - entry fee + $100 T's / 3rd - entry fee
Silver - 1st - prizes, entry x3, T's / 2nd - T's, entry x2, small prize / smalller prize, entry
Gold - gets the lion's share of the prize packages
I did like how ASA in SC ran for a while. The few tournaments I remember playing in were all pool play to start the day, then split up and the upper got all the rewards. Winner of the lower only got their money back & T's.
It really is impossible to convince some people to play up. It's even harder to govern all that stuff.