It's broken down of there is X royalties then A, B, C, D each have percentages. In this Case Say producers are A, they're getting a cut that's established, but now they're taking a percentage of D. So in this instance they're expanding their ownership through pressure of taking a cut from someone else.
Record producers are not entitled to royalties unless they have songwriting, composer, or performance credits on a song. Essentially, they're the guys who bring everyone together and make sure a song comes out at the end.
Many record producers do participate in the songwriting or composition process and are credited for that work (for example, Jay-Z), but the vast majority don't (for example, Glen Wallachs, co-founder of Capital Records).
Some producers do get "points" just for production, even if they don't get a full writer credit.
Production can mean anything and everything from project management, sound design, co-writing, arranging to hands-on instrumental parts - to turning up once a week and saying "Sounds great. Carry on."
The split depends on the producer/artist agreement.
Session musicians don't usually get points even though they may literally write their parts. In publishing terms a song is melody+lyrics, and everything else is work-for-hire arrangement.
This often gets renegotiated because it's clearly nonsense. But that's the starting point.
No, the law, and more importantly, the guilds (here, the SGA and SCL), are quite strict on these points.
A producer cannot "negotiate" creative credit if they did not earn it, because the guilds will not allow it.
If a producer wants writing credit, they must earn the writing credit by performing creative activities as specified by the guild rules. Project management and other "producing" activities do not count. Note however that the creative contributions of session musicians under WFH arrangements are generally attributed to their employer--i.e., to the producer, and SCL rules generally apply to determine the creative contribution the producer may claim for the work of session musicians.
Co-writing and arranging are not "producing" activities, they are writing and composition activities which can qualify for songwriting and composing credit. Few producers participate creatively in their songs, but the ones that do tend to be the more famous ones (like Dr. Dre, Jay-Z, Dr. Luke, etc.) and are use usually artists in their own right.