There is something wrong with modern Hollywood – we can agree on that. Too many remakes and sequels and prequels; far too many computer game and toy adaptations. Everyone thinks the profit-focused, top-down system is too busy chasing "pre-branded content" to find new talent, and too risk-averse to take a chance on original stories. Industry insiders complain as much as moviegoers, but viable alternatives are thin on the ground. Until a year ago.

In November last year, Amazon.com, the online book merchants turned internet visionaries, announced the launch of a new kind of movie studio. Their idea was to throw open the gates to all comers, regardless of geographic location, industry connections or – some would say – talent. The goal, according to their own website is: "To discover voices that might not otherwise be heard." On the new site, Amazon Studios, anyone could upload a screenplay, make changes or additions to someone else's screenplay and anyone could turn the screenplay into a test movie. At the end of the year, the best film to emerge from this process would win a prize of $1m and a meeting with Warner Bros development executives.

Not everyone was enthusiastic. Within days, a few dissenting voices had built into a chorus of criticism from industry commentators and screenwriting bloggers, in particular. John August, the screenwriter of Big Fish, Corpse Bride and Charlie and the Chocolate Factory, called it an "absolutely terrible plan". Craig Mazin (The Hangover Part II) said it was "a bad, bad, bad, bad, bad, bad deal" on theartfulwriter.com. Former Ain't It Cool News veteran Drew "Moriarty" McWeeny described it as a "horseshit Amazon Studios Ponzi scheme" in a column for HitFix.com. Their criticism covered the airily theoretical: can true creativity be crowd-sourced? And the practical: screenwriters are going to get screwed.

Twelve months have now passed, but on this last point, Mazin tells me that his feelings are unchanged. "The comparative lack of guarantees, rights, residuals, credit protections, healthcare and pension is astounding to me. In short, Amazon is offering aspiring writers a devil's bargain; in exchange for the mere hope of access, the writer must trade away many of the basic contractual foundations of our professional status." Studio director Roy Price counters that for a writer "in the earlier stage of their career", it's a fair deal.

And it's not just the hope of access. There's also the hope of cash. In less than a year, Amazon Studios have given out over $1.4m in prize money in monthly competitions for best screenplay, best test movie and best dialogue track, among other categories. By way of comparison, Scriptapalooza is a well-respected competition of 14 years standing, and gives away a $10,000 prize annually. "The million-dollar prize is so unprecedented and I know many of us are working so hard for that unbelievable carrot," says Marty Weiss, a screenwriter and Amazon Studios user who won the first screenwriting prize in December 2010. (His script The Alchemist Agenda is an Indiana Jones-esque treasure-hunting adventure story.) "Actually, nothing has changed as far as my career is concerned," he admits. "However, if The Alchemist Agenda gets made, it will be a gigantic leap forward."

Weiss is certainly not alone in enthusiastically embracing the possibilities of Amazon Studios. The relatively slim chance of winning that $1m prize, let alone having a movie made, hasn't stopped users submitting over 6,000 screenplays and more than 600 test movies since launch. Sean Hood, the screenwriter of Conan the Barbarian, an upcoming Ellen Page thriller and a blogger at genrehacks.com points out that most of the criticism of Amazon Studios emanates not from the unpaid new writers who contribute, but from screenwriters already established in Holly-wood. "Remember that writers are by nature a sceptical and paranoid lot, while studio executives have a stake in claiming that the system will stay just as it is. The result is a chorus of: 'It can't work!'"

There was one aspect of the site that even users were uncomfortable with. The dream of a radical creative democracy lasted only two months before, in response to user requests, Amazon Studios launched a feature allowing writers to control the level of input other writers could have on their scripts. Original scripts can now be designated "open", "closed" or "revisable by permission".

Amazon have not released figures showing which option is most popular, but anyone who's read the notoriously unhelpful user reviews section of Amazon.com will find it easy to speculate. What ambitious screenwriter would want their work "improved" by the hive brain that complained of Goodfellas, "There is no positive message whatsoever... I was sad to see Joe Pesce [sic] stoop to such a low in his career. He was soooooo great in Home Alone"? Or who gave Citizen Kane one star because, "It had no color and was uterly depressing [sic]"?

Weiss says his own experience has been mixed. "I've made some friends and collaborators on the site whose feedback has been awesome. There's also been a lot of crazy and worthless critiques, but that happens when you hand the microphone to the masses. Welcome to the internet."

Amazon Studios may have changed the settings, but they're sticking by their philosophy. "We still believe in collaboration and customer feedback is critical to our development process, says Price, whose youthful grin and spiky hair can be seen in an introductory video on the site's FAQ page. "The key to an open and democratically driven development process is getting feedback when you can still make changes. We think we have set up a system that allows for that."

Since Amazon Studios launched, the notion of crowdsourced cinema has had a credibility boost in the form of the Ridley Scott-produced Life in a Day, which combined YouTube submissions from all over the world to create a moving portrait of a day in the life of our planet. Six months earlier, the UN-backed One Day on Earth transformed a similar concept into both a film and an ongoing charitable enterprise. One Day on Earth director Kyle Ruddick says it's no coincidence that these two successes share both a form and a set of lofty, world-encompassing ideal. "No one wants to be 'the crowd' and no one wants to be 'sourced'... We learned really quickly that the inspiration to make something that might change the world or make a difference is 10 times more motivational than winning a laptop computer or something like that."

Community contributions have also been used to create more traditional narrative features, with less success. In 2008, the British film Faintheart used MySpace suggestions to recruit a director, cast actors, compile the soundtrack and even dictate the direction of the plot. "It's a lot easier to have all these collective perspectives, when you're attempting to make a collage in the first place," says Ruddick. "When you're creating a defined narrative structure, that has a beginning, middle and an end, I think it's going to be very challenging. And I think it's going to be really exciting, too." Faintheart didn't quite rise to that challenge. It averaged one- and two-star reviews, with many critics commenting on the contrast between the radical method of its creation and the decidedly run-of-the-mill outcome.

In fact, if there is one finding that seems to have emerged from Amazon's year-long experiment, it is this: the crowd isn't necessarily more creative than a traditional Hollywood studio. We'll have to wait till the first production hits cinemas to be sure, but based on the synopses for prize-winning scripts displayed on the site, Amazon Studios looks like a textbook case of a phenomenon observed by the influential web 2.0 critic Jaron Lanier in his book You Are Not a Gadget. "There's a rule of thumb," he writes, "you can count on in each succeeding version of the web 2.0 movement: the more radical an online social experiment is claimed to be, the more conservative, nostalgic and familiar the result will be."

Two of the winning Amazon scripts will be nostalgic to anyone who's seen Memento and one bears a resemblance to Despicable Me. Others include the self-explanatory Zombies Vs Gladiators and Road Trip Sex Party ("For three best friends and recent college graduates, finding tickets to the Super Bowl was the easy part. Getting there is the hard part.") There may well be more striking examples of originality buried somewhere on the site, but as yet, the judging process has failed to unearth them.

Not that there's any particular hurry. Chris R Morris, a technology correspondent for Variety says, with a multibillion dollar parent company like Amazon.com behind them, Amazon Studios have the resources to keep tweaking until they hit on the perfect formula. "It's not a major part of their [Amazon.com's] revenue, but it's not a big drain because, if so, the investors would be impatient. It's kind of like Apple TV: it's an experiment, it's a hobby for them and if something comes of it, great. If not, they learn something."