the wording is a bit confusing.... I understand where he would want copyright for the winning photo.. since he already states it will be part of a cover. but the last sentence has me wondering too. IMPORTANT:
If you enter this challenge, you automatically transfer you copyright of your image to me in case I choose your Image as the winning Image.
that would seem that he wants every entry's copyright. not just the winning one, seems a bit excessive? and he then doesn't have to pay you anything. not even the small change that Pixoto charges for downloads. I wouldn't enter this.
I have never, and will never enter a competition where as a condition of entering I give away the copyright. There is a world of difference between giving away copyright, and allowing use of the photo for limited, specified purposes.
Quite frankly I think this guy is simply trying to get his commercial artwork without having to pay for it.