Whats an overlay? :woosh:
I assume that the $200,000 grand prize is guaranteed no matter how many entries there are. In this case, they would max out around 4,000 entries. If they get the 4,000 entries, then even with the payouts to the individual 12 team league winners and the $200K payout, the company still makes money.
If they end up getting far less entries than they expected, then the company (RT Sports and MFL in this case) would have to come out of pocket and take a loss on the contest so that they can pay out the individual league winners and the $200K guaranteed.
From a player perspective, this would basically mean that the total entry fees would be less than the total prize money so it would be good odds to enter. So there is an "overlay" by the company and they are actually paying out more than they are taking in (assuming the original poster is correct).