John Scalzi summarizes the legal jargon, go read it. You’ll get paid for what you write, but then Amazon and the Licensors have full copyright ownership of everything you created. If you want to protect your rights you’ll have to change all the names, like Scalzi did with Redshirts.
This is nothing new, of course. Anyone who writes fanfic never had any legal claim on their work. That was a large part of the appeal. You are making something and gifting it to everyone for free, and in return they do the same. Eliezer wrote HPMoR, I used that to podcast it, Sam used the podcast to animate it. I get many of my FX from freesound, where other people upload their sounds for free for everyone to use. I upload my sounds in return (at least one of which has been used in a product) and the community as a whole financially supports the site. No one particularly minded, as there was no money to be made anyway. At best the original author gets extra sales from people who become interested in the world due to the fanfic (I only bought the original Harry Potter series because HPMoR was so good and I wanted my background. I never actually finished reading it, because frankly it wasn’t as good). At worst it’s just a bunch of people telling stories to each other and it doesn’t affect the author or publishers. Fanfic has been largely untouched by hostile hands due to this no-profit agreement.
Now Amazon is licensing fanfic for profit. At first blush this sounds good for the fanfic authors, but I have extreme reservations. Because now there is money to be made. Which means that if you’re writing fanfic and you AREN’T charging for it and giving the copyright holder a portion of the profits, there are lawyers that will make the case that you are stealing. Lawyers with a LOT of funding behind them.
I’m not saying this will happen, but now it could. And I don’t trust Amazon to not be evil. Hell, I don’t trust humans to not be evil, and they have preferences other than Maximize Profit! Give this tool to a Profit-Maximizing Optimization Process (which is what corporations basically are) and you will likely have to fight it to prevent a scouring of free fanfic.
Some people may not have a problem with this. The best fanfic writers will get some supplemental income and maybe make a name for themselves in the publishing world, and the rest will finally die off. But a lot of people first cut their teeth on fanfic. Every writer started out writing fanfic, most of them just had it in their elementary school notepads where they don’t have to admit to it. Imitation is always the first step in learning. Even people who don’t plan to write professionally often write fanfic sheerly for the pleasure of writing it. Soon they might be prosecuted if they don’t wish to turn over fiction written in licensed worlds to Amazon.
And some people have other agendas entirely. Harry Potter and the Methods of Rationality is explicitly a teaching tool. It isn’t just there to tell a story, it’s there to promote rational thought in readers. To help raise the sanity waterline of the reading public, just a wee bit. That’s why it was written. That’s why I do the podcast. I am not seeking financial gain, I am trying to make the world slightly better, and slightly more like me. This is a purpose important to us, too important to limit it behind paywalls. The work is given away free not just out of necessity, but also to disseminate it as widely as possible. If we do not wish to charge for it, will Amazon be able to take us to court and force us to charge or remove it?
I’m betting we’ll find out sooner or later.