Advance

Though the size of an author's advance is something loudly and frequently discussed in publishing circles, an advance really represents the publisher's payment against future royalties, the amounts actually earned by a book when it's being sold in retail outlets. Because there can be a lengthy period of time between the sale of the book to the publisher and actual release, much less the time when money is collected by the publisher, an amount is "advanced" to authors. Before any royalties are paid, the advance amount is recouped by the publisher. Full recoupment is known as "earning out" the advance, and after that, the author will receive their standard royalty amounts.

Though publishers use sophisticated formulas based on market research and historical data, there are times when an advance remains unrecouped. Authors who do not earn out their advances risk being dropped by their publishers.