When you write a song entirely, you are entitled to 100 percent of the royalties. That means you must have composed the music and written the lyrics. In cases where you co-wrote the song, you are entitled only to a share of the royalties. The split is typically decided by the songwriting team. In cases where a split isn't agreed in advance, disputes over royalties may arise. This is more likely to happen if the song is successful. Hence the old saying "where there's a hit, there's a writ."
A common dispute relating to songwriting royalties is that of the non-credited songwriter. In band situations, the identity of the songwriter isn't as clear as you may think. Many songwriters, including Tony Hadley of Spandau Ballet and Morrissey, formerly of The Smiths, have been sued by former band-mates claiming to have contributed to the writing without being credited.
Royalties are typically paid every quarter, by check. The amount you receive varies according to the amount of revenue generated in that particular payment period. Revenue is generated by air play, synchronization and public performance. For example, your song may be played on radio, "synced" in an advert and covered by another band. All three uses generate a different payment rate.
To work out what you are owed, royalty collection agencies have a weighting system. The American Society of Composers, Authors and Publishers, or ASCAP is one of the largest collection agencies in America. Their payment system takes into account the medium, the time of day and the share resulting in the "Credits x Credits Share x Credits Value = $ Royalty" formula.
You typically won't receive all of the revenue generated from a song, especially if you have a publishing deal. Publishers exploit the rights of your catalog to optimize your potential earnings and take a cut. They push for your songs to be featured on adverts and in films. In return for the right to administer your catalog, they pay you an advance. For example, your publishing deal may include a $50,000 advance in return for a 25 percent share of all publishing revenue. This advance is normally very welcome, as it gives most songwriters the chance to give up their day job. When the revenue that the publisher earns from your songs exceeds the value of the advance, the deal is referred to as "recouped." Being recouped gives you a lot of bargaining power when you come to renegotiate.