I posted earlier an interesting controversy between Hydra, an imprint of Random House, and SFWA (and, in particular, it's president John Scalzi). I have a few more things to say about that.
Many of the small presses (TM Publishing, Jollyfish Press, and Stonehouse Ink) that I encountered at LTUE a few weeks ago expressed some of the same contractual terms that SFWA so vehemently rejects in the Hydra imprint, namely that they didn't offer advances to their authors. I'd be interested to see what their other standard contractual terms are, and whether or not they align very closely with the other objectionable Hydra terms. Honestly, at LTUE, each of those small presses seemed pretty respectable. They were, slowly but surely, making me into a believer in the no-advance, small-press world. But, having witnessed this whole controversy, and thinking back on the fact that the most specific reasons I can remember them offering for not offering an advance were (1) "the publishing industry is changing" and (2) "we're a small press, we're just starting out, and we'll sink or swim with our authors," (those aren't really direct quotes, but general summaries of what I remember a few of their editors saying) I'm doubting once again.
As far as (1) is concerned, well, that's true. The publishing industry is changing, and it's changing a lot. Traditional publishers are on the defensive, scrambling to secure their place in the future publishing world. Self-publishers and small presses seem to be emerging on top, or at least on more equal ground than that which they had occupied only two or three years ago. The business model is changing, and I can see why small presses might attempt to not offer an advance. In an era where audiences are shrinking and writers are a dime a dozen (among many other reasons), an advance may not be very practical, especially for a small press that's just starting out. That said, Hydra is still the imprint of one of THE top publishing houses, so why they wouldn't offer an advance (other than to make more money for themselves and screw authors) is beyond me. I think what Hydra is doing is despicable; I think what many of these other small presses are doing is merely self-serving (which, honestly, I can't blame them for that, but it doesn't make me feel better about signing a contract with them).
Regarding (2), well, each of these presses is relatively new to the publishing industry. It wouldn't surprise me if they didn't have much funding available to them to give out for advances. TM Publishing and Jollyfish, as far as I know, haven't even released anything yet. That said, if they're picking up writers now, without offering an advance, there aren't many reasons why they would start doling them out in the future, even if they do start making a fair share of cash. My issues with large presses not offering advances aside, I still have a hard time swallowing the decision with small presses. The small presses I talked to at LTUE were all about ROI (return on investment)--they didn't give out advances because they wanted to make the minimal investment with maximum returns. From a business perspective, that makes absolute sense. I'd like to do the same thing. And not giving an advance, of course, is very minimal investment, so minimal that I worry whether the publishing house will care at all whether the author succeeds or not. To me it seems less of a "sink-or-swim together" mentality and more along the lines of "you can put our name on your book, but if you sink, we won't dive in after you." That sounds like a pretty dismal deal, if you ask me.
So, as for me, I'm going to continue pursuing publication through the traditional route first. I'm looking for agents, publishing houses that have been around for at least a few years (Tor and Pyr are my personal preferences [i.e., in a dream world I'd be picked up by one of those two houses]) and that publish on multiple formats (both print and ebook), and of course, contracts that offer an advance (among many other things, hopefully). I think that's the route for me.
That said, indy-publishing and small presses are really gaining traction, and I don't want to rule them out entirely. I admire what a number of them are doing on a business level; I just don't want to see the author get screwed in the process (not only because I am one, but because I think that sort of business kills the artistry of the thing, which, in the end, is what I'm most interested in). I would certainly prefer the traditional route, but I'm open to all options. Who knows where the publishing industry will go in the next few years, anyway?
Also, if you're interested, John Scalzi talks more about why he thinks advances are so important over at his blog, Whatever. Check it out.