The fanfic communities have been
all over this; there've been roundups of
fannish and
pro reactions.
My own thoughts: it's a bad deal for authors, like many publishers' "outreach" programs to allow unsolicited manuscripts from the web. It's got low royalties compared to other ebook programs, and allows Amazon & the media company too many rights. It's not "licensed fanfic;" it's "essentially invite unsolicited manuscripts for tie-in novels" (not my quote.)
The terms are more invasive than most tie-in novel terms, but not substantially so. Unlike total works-for-hire, the author here retains some rights. (It's unclear what those are, since it's an "exclusive" contract; I suppose they can write more with their original characters, not in the tie-in world, and publish it as kindlebooks?)
A
comment at The Passive Voice points out that the stories will go through an editor of sorts; they're not accepting any-and-all stories. There may be a list of rough plot outlines they're looking for, and otherwise, there'll probably be a strict list of thou-shalt-nots: only canon pairings, or no converting the villain to good nor the hero to evil, or no "coffeeshop AU," and so on.
They're looking to catch the next E.L. James before she can make it big without giving them a cut; they're not looking to actually publish fanfic.
Also: the three worlds they're starting with are all corporate-owned; the books are works-for-hire. There is no author to get involved with the approval process. It's possible Kindle Worlds will never have options to write in a single-person-owned world, but be focused on TV properties that may or may not already have tie-in novels.