I am not fundamentally against the venture. It is probably something the top 100 or so prospects should not do, however. Plus they tend to be the ones with signing bonuses. Maikel Franco did not get a large LA bonus (about $100K if I recall) so he might have been the type of mid-level prospect where this makes sense. They need to be making money on this though, so I am guessing the percentage they take is substantial in an actuarial sense. So if you have $500K in the bank from a bonus it may not be a great idea to give up 5%-10% of your future salary.
I do feel good whenever a guy like Yacksel Rios without a huge bonus makes the show. Getting paid $3,000 a day is worth it after making $1,100 a month. Whether this type of thing would make sense for someone like him would be interesting, though as you say it is possible they don't even bother with guys like Rios because there is too much risk.