Question about Contested Shot

Does it just reduce the effect that a contested shot has on your mid range and 3 point rating?

In other words, if my mid range is still at 72 but I bump my contested shot up as high as it can go then it's almost a waste of time because my mid range is still only a 72? So I should rank up mid range first and then contested shot?

There'd still be value in increasing your contested shot rating, but you're obviously not going to see the benefits of those upgrades on open shots. Levelling up the mid range rating first is probably the better way to go. Aside from that, you could try upgrading them in tandem, alternating between the two as you earn Skill Points, so that they progress at a similar rate.