Advance against royalties
Encyclopedia
In the field of intellectual property
licensing, an advance against royalties is a payment made by the licensee to the licensor at the start of the period of licensing
(usually immediately upon contract, or on delivery of the property being licensed) which is to be offset against future royalty payments
.
For example, a book's author may sell a license to a publisher in return for 5% royalties on sales of the book and a $5,000 advance against those royalties. In this case, the author would immediately receive the $5,000, and royalty payments would be withheld until the publisher's takings from selling copies of the book reached $5,000, after which point the 5% royalty would be paid on any additional sales.
In some business areas (e.g. film production), it is common practice for the licensee to demand repayment of any advance that is not covered by royalties, whereas in others (e.g. book publication) this practice is unusual.
Intellectual property
Intellectual property is a term referring to a number of distinct types of creations of the mind for which a set of exclusive rights are recognized—and the corresponding fields of law...
licensing, an advance against royalties is a payment made by the licensee to the licensor at the start of the period of licensing
License
The verb license or grant licence means to give permission. The noun license or licence refers to that permission as well as to the document recording that permission.A license may be granted by a party to another party as an element of an agreement...
(usually immediately upon contract, or on delivery of the property being licensed) which is to be offset against future royalty payments
Royalties
Royalties are usage-based payments made by one party to another for the right to ongoing use of an asset, sometimes an intellectual property...
.
For example, a book's author may sell a license to a publisher in return for 5% royalties on sales of the book and a $5,000 advance against those royalties. In this case, the author would immediately receive the $5,000, and royalty payments would be withheld until the publisher's takings from selling copies of the book reached $5,000, after which point the 5% royalty would be paid on any additional sales.
In some business areas (e.g. film production), it is common practice for the licensee to demand repayment of any advance that is not covered by royalties, whereas in others (e.g. book publication) this practice is unusual.