Personally I see a lot of potential problems with this. The minute money is involved there's a lot of potential for abuse. The fanfiction world works on a sort of honor system. But when there's a chance to earn money on fanfiction what is to stop someone from submitting a story someone else has written? How would you prove which of the two people claiming to be the brains behind the story is actually the person who wrote it? Fanfiction is posted all over the web, some use larger archives, some use personal blogs or sites. Not all of it is conveniently timestamped so that there is a clear cut way to prove who wrote it.
* Stories will be available in digital format exclusively on Amazon.com, Kindle devices, iOS, Android, and PC/Mac via our Kindle Free Reading apps.
* Amazon Publishing will acquire all rights to your new stories, including global publication rights, for the term of copyright.
So no posting your story elsewhere, meaning it will divide the fandoms between those who decide to seek publication and those who choose to remain in the fandom. I predict that authors deciding to seek publication will be viewed as deserters and be resented for their action. There will be two camps of attitude, the elitists which will consider fanfiction posted online as 'not good enough' since it's free (kind of like how some already view fics posted on fanfiction.net compared to fics posted on sites with stricter regulations - just much worse), and the purists which will consider fanfiction publised for profit as sellouts.
And let's not forget this very vague part of their guidelines: It is the authors' responsibility to ensure that their content doesn't violate laws or copyright, trademark, privacy, publicity, or other rights. The very point of fanfiction is that it does do exactly this, you are using characters, worlds and events you didn't create yourself - you are expanding upon other people's intellectual property. Most of us will involve a bit of dialogue taken from the book, movie, episode, game, etc. - some more than others - so where do we draw the line between what is alright and what isn't?
And then there will most likely a lot of restrictions on what can and cannot be published in terms of content (now talking about content that isn't directly repeating dialogue or specific events taking place in the fandom, but that entirely created by the fanfic author) - firstly there's the whole concept of shipping - will only canon ships be allowed (this could potentially make already existing shipper wars worse)? What if a fic rewrites part of a character's history - will that be allowed? What if it suggests a lot of things about a character which has never been confirmed or even hinted towards?
All in all I have a bad feeling about what this potentially could do to the fandoms out there... because I can just predict a lot of resentment between groups...