What is an advance in a literary publishing agreement?
An “advance” in a publishing deal is similar to an advance on future payment in any other context.
That is, it is not just a check written to an author in advance of the deal like you might think from the name. It is an advance-on-royalties. Meaning, the amount the author gets in the advance is “repaid” from future royalties.
Consider this hypothetical (these are example numbers and shouldn’t be used for any kind of guidance about a particular deal):
- An author gets a $25,000 advance.
- The deal also provides for a 10% royalty (in reality, this will depend on the type of royalty, but that is for another post).
- The book sells $1M worth of units.
How much does the hypothetical author get? Well, the author got $25,000 up front, and the author will get another $75,000 from the royalty.
You might be thinking 10% of $1M in sales is $100,000, shouldn’t the royalty be $100,000? The answer is: it is! It is just that the author got $25,000 of that $100,000 before any of it was actually earned – hence the term “advance.” Before the author receives any percentage on the back-end, the publisher has to recoup the initial advance. Once the publisher has recovered the advance, the author is said to have “earned-out” the advance.