It's only been fairly recently that the NCAA allowed schools to offer guaranteed multi-year scholarships. Even now, schools can pick and choose how many they choose to give (i.e. most schools still give one-year renewable scholarships).
http://www.cbssports.com/collegefootball/writer/jon-solomon/24711067/schools-can-give-out-4-year-scholarships-to-athletes-but-many-don't" onclick="window.open(this.href);return false;
The problem I have with not renewing a scholarship has more to do with the NCAA than it does with any individual program. It's one of those necessary evils, but the NCAA makes the player still sit out a year if he transfers to a same-division school. That's not right. That's an NCAA problem which needs to be fixed.
A couple of regional examples have occurred in basketball within the last year or so. Boise State cut a player, a former Idaho Gatorade player of the year. They gave the reason he was seeking more playing time, but he came out and said he was cut.
http://www.idahopress.com/blogs/melba-grad-joey-nebeker-unhappy-with-departure-from-boise-state/article_2a59c0d4-cb63-11e3-bcee-0019bb2963f4.html" onclick="window.open(this.href);return false;
Just within the last two weeks, BYU made a similar announcement that a couple of players are transferring to seek more playing time, but one of the players said he was shocked and was cut.
http://www.sltrib.com/blogs/byusports/2427072-155/byu-basketball-neilson-shocked-that-he" onclick="window.open(this.href);return false;
Like I said, it's a necessary evil. But it needs to be fixed that a player can transfer without losing a year if his scholarship was cut.