John,
Depending on the type of contest you offer.
Some contests are strictly aimed at top performing affiliates (like the ReferBack contest a few years ago where they gave away a car to Shawn). These contests are overlooked by the medium to smaller affiliate as they feel they have no chance of getting the prize.
Some of the best contests I find is setting specific goals which are achievable by affiliate promoting your property. An example of this is to give an extra $2,000 to the affiliate who brings in the biggest depositor for the month of January.
At VIP Profits just before I left they ran a contest giving away a free trip to Las Vegas for the affiliate who brings in the first 20 or so player signups using their new affiliate link (this is aimed to get the affiliate to change over to the new system).
Contests are a good thing as long as you do not overdo it.