That assumes that a company can maintain the monopoly while gradually making its service worse and worse. Other companies can spring up which take advantage of its margins (as Jeff Bezos may have said, "my margin is your opportunity").

What Amazon would have to do to maintain a monopoly is to continuously locate and destroy startups which try to compete with it, by using its scale. You're saying that, while it's doing this, it may make things worse for the consumer. Perhaps, but that's REALLY tough to do (until someone writes software to do it).

One thing is for sure though - regardless of how good the service is to consumers, the demand for human labor will erode further and the comparative advantage of local economies will erode all over the world - not just for books but tons of products and services. As a result, we will need an ever greater welfare state so that many out-of-work people can be paid to be consumers and send price signals back into the economy, even if they are unable to make much money themselves (because presumably robots would be employed instead).