There's a really interesting discussion (via BookNinja) going on over at John Green's blog about advances vs. bigger royalties, and why the latter might be better as a whole for both authors and publishers. He also has a follow-on based on some feedback received.
I find it really interesting when compared to the video game (AKA my day job) industry's publisher/developer model (which is somewhat similar to the publisher/author model). The developers that don't survive are the ones that sign contracts with publishers that don't actually cover the development costs of a game, counting on a major hit's sales to earn out their advances and bring in royalties - a rarity in the industry. It's actually a very low margin industry since most of the costs are labour.
A smart developer will structure a contract such that the advance pays for the costs of development plus a minimum built-in margin (which covers R&D, a little profit, etc.), under the assumption that there will never be any royalties earned.
I'm wondering if the problem with author advances is that they are typically more random. Perhaps if advances were actually calculated based on an author's development costs (ie, some number calculated from time spent writing multiplied by some reasonable hourly rate), if a smarter royalty structure could then be created. This would normalize advances based on actual cost of labour, rather than the current structure which is based on some imaginary expected return pulled from thin air, or a good agent's negotiating tactics. With more normalized advances that take into account the true cost of creating a book, perhaps there'd be room for higher royalties in contracts.
Yes but that would HIGHLY reward people who can churn out massive wordcount. And I have enough of the deck stacked against me...
If you spent 1 year full-time or 2 years half-time working on a book, would you be happy with a $10,000 advance? This doesn't come close to being a workable salary structure to keep one in food and rent. So my point is that as writers, should we be accepting advances that don't cover our development costs? If we do, we're devaluing the work involved in writing.
The super large advances that aren't based on development costs are hurting the rest of the cost structure. The argument is supposed to be that one "hit" pays for mid-list advances. But if that were true, would the average writer in Canada be living below poverty-level (I'm told that people who list "writer" as their profession on the tax forms here make an average of $7000 per year)? Just because you got a super-large advance, doesn't mean *your* book is going to be that hit.
It might be in more authors' interest to assume that a royalty might never show its face, and to insist on some basic cost-of-living (plus a reasonable margin) being covered in advances.