Mike Shatzkin writes: 6. Amazon pays amateur authors, often unedited, who upload files not yet ebook-ready to them and don’t know anything about marketing or metadata, as much as 70 percent of retail if they meet certain exclusivity and price stipulations. (Obviously, there are great gems among those, but they are still mostly unproven, unknown, and unsuccessful.) They are apparently fighting hard to avoid giving Hachette — which invests substantially to be consistently superior to a fledgling author on all these counts — the same cut.
Let me rewrite this into something that makes actual sense.
Amazon pays authors 70 percent of retail if they price their work in a certain marketable range, and 35% if they don't. Even at 35%, Amazon remunerates its authors better than any of the Big 5 publishers.
With this arrangement, Amazon had minted money as self-published authors have successfully exploited previously unrecognized or unprofitable literary markets, These authors now dominate ebook sales at Amazon, now account for 1/3 of all sales. Not only that, they churn out work quickly, riding every niche wave that shows up, rewarding Amazon with even more profits.
With this arrangement, many authors have been able to earn enough to make their living off of writing, turning professional. These writers have crept to the top of the Amazon charts because they successfully used a growing ecology of literary professionals (editors, artists, reviewers, etc.) to produce professional qualities books. The top earners take so much in royalties that getting "properly published" loses them significant amounts of money.
In contrast, with remuneration dropping for new authors writing for the Big 5, fewer signed writers can make their living only from writing, thus turning these "properly published" authors into amateurs. The overhead of publishers overhead keeps them from exploiting niche markets. Their slow time to publish keeps them from riding fads or fashions. Their low pay now discourages freelancers from publishing with them as a niche will provide a better return on investment than an advance.
As to how Amazon is remunerating Hatchet, that's a business deal.
If you read nothing else, notice that big black line up there. That's where Amazon's money is coming from. That's the part that shaken up the literary world.