Royalty advance
Royalty advance: A royalty advance is an upfront payment made by the licensee to the licensor at contract signing (or on a schedule during the contract term). The advance is recouped — amortized against earned royalties — as the licensee generates licensed-product sales. Once cumulative earned royalties equal the advance balance, the licensee has "earned out" and additional royalties become payable as new dollars.
A 3-year contract with a $50,000 advance at signing. Year 1 generates $20,000 in earned royalties, applied against the advance. Advance balance at end of year 1: $30,000. The licensee owes no additional royalties to the licensor until earn-out.
Related glossary terms
See how Royalty Reporting handles royalty advance.
Walk through royalty calculation, advance recoupment, statement generation, and audit trail in a 30-minute demo with our team.