Often readers hear that an author got a particular advance and imagines this is bonus cash for signing a deal. For example Nypress.com reports about The Night Circus (2011) "Doubleday paid Morgenstern a high six-figure advance for the book".
The publisher gives the author the advance. Typically these are in the $10,000 range for an author with a big five publisher (Harper Collins, Penguin Random House, etc).
Sometimes a book will spark a bidding war and they can stray into the high hundreds of thousands (The Night Circus) or even multi millions ($3.5 million for Justin Cronin's trilogy that starts with The Passage). These are often driven by the early promise of a movie which indicates additional sales down the line.
Often when you see "a six figure deal" for a new fantasy author it means for a trilogy, and generally we're talking $100,000. So $33,000 per book, paid in stages (signing, manuscript acceptance, hardcover release, paperback release).
So if that author releases a book a year, which is the typical model, then their six figure advance from a major publisher (a VERY hard thing to get hold of) is an annual income of $33,000. Set this against the US median household income of $62,000, take away any form of job security or medical insurance ... and boggle.
So, what is an advance exactly?
Well, it's kinda a cash bonus, and kinda not. For authors an advance is a de-risking device, and for publishers it's a risk. For both of them it signals a commitment to the success of the book.
The advance is, in some senses, a gift. It cannot be taken away as long as the author delivers the book/s and they are accepted. If my next trilogy only sells three copies I will still keep the advance.
In another very real sense the advance is not a gift. If my next trilogy sells a hundred thousand copies I won't see a penny as all of the income from royalties that would otherwise by paid to me will instead go to the publisher to pay back the advance. That process continues until the publisher is paid back. At that point the book is said to have "earned out". After that point the royalties (typically ~5 to 15% of the cover price, depending on the format) will come to me.
So whether I have to sell 1 copy or 1 million copies before I see any more money depends on the size of the advance. With no advance I will earn from the first sale. With a million dollar advance I would have to sell many hundreds of thousands of books, maybe millions if most are cheap ebooks.
One extra wrinkle on the advance that I recently became aware of, and that I am assured is a factor in many deals that are heralded across the interwebs, is the "conditional advance" where some or all of the advance is conditional on hitting certain sales targets. A particular number of sales in hardcover, for example, or a particular number of sales in the first year.
To me, this is bullshit, as it heavily waters down what an advance is. A conditional advance is very little different to royalties. If I am offered a million dollar advance conditional on selling a million copies ... it means nothing, because I would have earned a million in royalties by selling a million books.
Anyway, on the diagram below I show in black the advances on my various books. There's no scale, the heights of the columns are for comparisons only. The coloured columns are the total royalties paid to me so far for each book. For Red and Grey Sister the yellow columns are based on the royalties earned in the US reported 2 months prior to this post, projecting similar UK results.
So, you can see that Prince of Thorns has earned out more than four times over.
You can also see that my advance increased slightly from The Broken Empire trilogy to the Red Queen's War trilogy, and again to the Book of the Ancestor trilogy.
I have not included any conditional elements, and I have used contemporary exchange rates, which is the main reason the most recent trilogy shows a slight decline in advances, since half of the advance is in Sterling and the pound has crashed against the dollar during the BREXIT years.
click for detail
Anecdotally, I have heard that well in excess of 95% of authors with the big five publishers get less than $100,000 per book (in the States as a scientist I earned more than $100,000 a year as a scientist nearly 20 years ago, so even these big advance guys are not on rock star salaries!). Also anecdotally I hear that the big majority of books from first time authors do not earn out their advance during their lifetime.
The model is that some very successful books subsidise the advances paid to new authors.
For the author the hope is that they have a back catalogue of earned out books that provide an income stream to augment the advances coming in on their newer work (if they are lucky enough to be able to continue to get them).
In short: don't give up the day job just because you get a six-figure advance!