MicrostockGroup

Because what buyers pay varies on how many credits they buy. The larger amount of credits, the bigger the discount.

A onesy-twosy buyer may be paying $1.50 per credit while a buyer who bought a ton of credits may be paying $1.00 per credit. So when each of them buys the same image from you, you will get different royalties.

Yup, iStock runs sales on the price of credits and then makes the contributor take a hit when the lower cost credits are used. Great business model, for them.

Only type of business in the world that I'm aware of where the supplier takes a hit because the reseller runs a discount! On top of that, the reseller in this case gets it's product for free. Plus its also the only legitimate business on the planet where the cycle runs like this: You got, you sell it, you still got it to sell again.
There is another business that works like that though. It's known as the 'worlds oldest profession'.

With an international business, the flat rate system allows companies to play games with currency fluctuations (look at the threads about FT's compensation).

I'd prefer a variation of the current system. Bulk credit purchases having a discount seems fine to me, and getting a percentage of the actual price paid for credits seems reasonable (although not entirely fair as IS gets to keep all the money it makes on holding the buyers cash between purchase time and payout to us).

What irks me is that IS offers "I'm sorry" discounts and other promotional discounts and then contributors pay for those too. I think that should come out of their cut as a promotional expense, not be bourne by contributors.

I think it should come out of the pockets of those who made the blunders and/or the people that told them to do it and/or the alleged quality assurance people [1]. Yippers, we all love working here is all fine and dandy, but why should we pay for their mistakes?
[1] I can't think of any time since I joined iStock that they haven't been advertising for QA people in their 'careers' page.