In practice, every Flattr member needs to pay at least 2 euros per month (you can up to 5/10/20 as well). Then, during each month, you discover content on the web that you really like, be it text, audio, video, or something else, and you want to “flatter” the creator. You then click a small button the content creator has placed on her site. After each month is over, your monthly allowance (e.g., 2 euros) is divided evenly to all of the content creators whose work you have “flattred” during the month. Flattr itself takes 10% cut initially.
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Flattr’s system encourages (or enforces) reciprocity – in order to get money from Flattr, you also need to be an active giving community member. Before you can get flattred you need to add some funds for flattring others, and if you empty your whole account you stop getting money as well. And if you do not flattr anything during a month, your allocated budget will be directed to charity.
The more you share and the more you flattr (or “like”) things, do not cost any more to you than the monthly fee you are already paying. Thus sharing and donating should increase a lot. Also content creators could in theory get even higher income, as people who really love their work could donate multiple times instead of typical one-off payments.
Flattr’s ideology does not fall very far, as one of the co-founders of Flattr is Peter Sunde, co-founder of the (in)famous The Pirate Bay, also a strong evangelist of civil rights in the digital world.
I see Flattr as an extremely interesting concept, one that I would definitely like to spread very wide in the web. This kind of system does require a huge critical mass, though, in order to work properly and interest the wider audience. It could also be that Facebook decides to implement something similar, now that they are building their Credits system as a ubiquitous billing platform, and allow already people to “like” pretty much all of the web.