My brain is a single-track dust road. The brain of Jeff Bezos is an eight-lane highway. Nevertheless, here's my guess at what JB is up to here:
Increasing Prime membership is Amazon's top priority. In December last year, JB talked of the 'tens of millions' of Global Prime members. It's notoriously difficult to get sales data from Amazon, but my guess (based on my own buying behaviour) is that Prime members buy a very high percentage of all their purchases from Amazon. The Prime add-ons are secondary to the benefit of free fast delivery of pretty much anything you want.
Amazon have precious data from their two companies, Goodreads and Audible. They know how many people hungrily consume books, and their preferred format. JB will have a very good idea as to how many extra Prime members he'll get from this audience, along with their likely lifetime spend on all Amazon purchases.
Despite media-bias, the line between traditional publishing and self-publishing is becoming more blurred. Books like Wool, FSOG etc., are helping breach that perception border in the public mind. An unlimited digital library of books will, like any market, gradually find its own shape and books will be borrowed on the basis of popularity rather than provenance.
You won't be in that library unless your books are in Select, imo. This bolsters another part of JB's multi-faceted business plan to remove as much digital content as he can from competing channels. And we're not just talking about the likes of B&N here - this kills books in Google Play and Apple. Those channels dry up while Amazon grows. Not only has content disappeared outside Amazon, other ereaders become obsolete, pushing their producers closer to doom.
Unlimited subscriptions will finish off Scribd and others in that line. And I suspect that JB has a plan to kill off the book business affiliates like Bookbub - quite what that plan is, I don't know, but KU might be a strand in that strategy.
As for authors, I doubt we are different from apps developers in the minds of many. We could indeed all end up with a dollar a borrow (in fact, come 2020 we might be calling a dollar a borrow the 'good old days'). But the swollen market of buyers/readers this concept delivers might well see many self-publishers making an awful lot of money; especially those with a book series running into double numbers.
Think of the data we'll get to help hone our individual markets...if more than x% of readers don't get past the first 10% of a title, well, you won't be wasting time on anything like that again. I believe we will be provided with tons of other data from this venture, which will allow us to refine target markets.
I hope this goes ahead. Partly through my fascination as to how it will all turn out, partly because I've always believed that books will do much much better for their authors as low-cost/high-volume entertainment than any other way.
It's an uncertain but hugely exciting time to be a writer. I'm of a generation who was lucky enough to see many of the sporting greats, and some wonderful actors and singers. I count myself privileged to still be around to see what the genius that is Jeffrey Preston Bezos will do next.