Something seems a bit odd about this claim. While I have read several books with poor formatting, I've read many Kindle books with outstanding and complicated formatting as well -- which suggests that publishers are not dealing with a fully automated process and have zero control.
Before I get started
afaik it isn't difficult for Amazon to switch to ePub or an ePub-compatible format with a proprietary DRM wrapper, thus maintaining product separation. I don't think adding more platforms really makes a difference, especially since they own Stanza now. So who knows, it could happen. But....
The AZW/Mobi format is really just HTML with limited CSS support. I can see how automated conversion will not produce ideal results, but I would be stunned if publishers were not given the option to submit books with the proper HTML setup. (Nor does the evidence indicate that publishers are
required to submit an unformatted document, or an ePub.) There are 3rd parties that offer conversion services. Even with the Digital Text Platform (the self-publishing service), Amazon recommends you set up the HTML and formatting yourself prior to submission.
I might add it really isn't a problem to have illustrations in AZW; e.g. Tom Holland's
The Forge of Christendom has many maps. I can see how the conversion process may have issues, but that isn't a limitation of the format.
It sounds to me like Tor did everything in ePub, and now does not want to pay to convert their books to AZW or an HTML process. I can fully understand that choice, as this lowers their costs and ePub is intended for use that way; but if Amazon is paying the expense of conversion, I don't see how Tor can complain too much about it (especially if, as you posit, better conversion processes exist than what Amazon uses). However I don't have access to all the details here, so that's just a guess.
It's probably going to suck for the publishers if they have to make two formats (ePub, AZW) and can't efficiently automate the process. However, a) making two formats is still better than formatting for ePub
and BBeB
and B&N's PDB
and PDF
and eReader and so forth -- i.e. the situation is still slightly better than it was even 2 months ago; and b) they'll do it anyway, and it will make economic sense, if the Kindle continues to / ends up commanding 60%+ of the market.
On a totally separate note, in the short term I'd rather see them expend the effort on improved PDF support, especially for the smaller devices.
P.S., our friends at Apple eschewed the far more popular MP3, and less popular but more widely available WMA, for songs it sold on its music store. It would've been "better for consumers" for them to use MP3 or WMA, but they didn't, and still spanked the competition. Go figure.