If Prince's next album--due Oct. 20--does not sell enough units to turn a profit for the company, sources say, his advance for successive albums will be reduced significantly to compensate for their losses.
In the pop world, a "guaranteed" cash advance is like a separate interest-free loan that the company deducts from the entertainer's share of the profits every time one of his or her albums sells.
The advance for each album is deducted from an artist's royalties on the album until he or she sells enough records to pay back the $10 million, which means about 5 million copies in Prince's case--given his estimated 25% royalty rate.
If the album doesn't sell the 5 million copies, Time Warner reportedly has the right to deduct the difference from royalties generated by all of his previous albums.