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Just to be clear, they are not paying list price. They take list price for each book and multiply it by the number of times read to come up with a value for the books reads during the month. They then use the proportion of this value to the value of all the books read in the month and use it to divide the pot. So let's say for the months the value of all reads is 1000 books x $5 list price per book, so $5,000. However, the total subscriptions for the month are only $1,000. An authors book has a $5 list price and is read 10 times so the value of reads is $50. The authors proportion of the fund is $50 divided by $5,000, or 1%. So they receive 1% x $1,000 x 60%, or $6. If the pool matched the total value of books read ($5,000) the author's share would then be the equivalent of a royalty of 60% of list price ($30).
This is one of the strengths of the program, since Kobo has limited its costs. It will not suffer the fate of Oyster, Scribd etc at the hands of the large publishers. It basically takes the pool of subscriptions in a region for a month, takes 40% as its share and then divides the rest amongst the authors in proportion to the "value" of their reads to total reads. One advantage to their authors will be that the pool of funds is the total subscriptions. It is not, like KU, an amount determined by Amazon each month in some mysterious fashion. It is in an authors interest to inflate their list price, so Kobo will have to watch this. There is also the potential for authors to share with Kobo in a windfall if total subscriptions exceed the value of books read, though I doubt this is very likely.
I applaud Kobo for giving it a try, if only because I like to see some competition. Sadly, I do think it is going to be rorted.
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