The End of the Advance?

Strangely enough, I had not one but two important conversations about book advances yesterday. First, I was talking with my agent, Sorche Fairbank, who relayed some good news: The first book proposal we worked on recently attracted a good publisher and that publisher had offered us a book deal. (A book deal!) But then came the not-so-good part. The advance was a lot smaller than we first hoped.
In exchange for the low advance, we're trying to get some other concessions that will make the deal work. (I will keep you posted.)

Now - later that afternoon, I had the pleasure of sitting down with agent Sharlene Martin, who was in the building here talking with some people. She brough up advances again - saying that they're slowly going away or getting smaller. This is happening for two reasons, she said.
First, 90 percent of books don't earn out their advances; and second, we're in a recession and places are looking for ways to cut costs.

All this said, there are two strategies to lowering book advances. There is the strategy that you just pay authors less and keep your publishing house afloat. And then there is the strategy that you pass less on the front end in exchange for a much better deal on the back end. For example, instead of earning a standard $1 royalty per book, maybe you earn $4.25? The publisher pays no money upfront, and the publisher and author are tied to the book's success together in an integral way.

Hmmm ... I wonder how this all will play out. Thoughts?