The single biggest challenge facing any Bitcoin treasury strategy isn’t volatility — it’s carry. Every dollar sitting in Bitcoin earns nothing while you wait for appreciation. Institutions that understand asset finance have always known the answer: pair an appreciating store of value with an income-producing asset that services the cost of holding it.
Music royalties are that income asset. And nobody has built the structure to combine them — until now.
The Negative Carry Problem in Bitcoin Treasury
When a company like Strategy holds Bitcoin on its balance sheet, the cost isn’t just the price paid. It’s the ongoing drag: debt service on the bonds used to buy BTC, management overhead, and the opportunity cost of capital deployed into a non-yielding asset. These costs eat into returns before Bitcoin appreciates a single dollar.
For smaller funds that can’t issue convertible bonds at Strategy’s scale, the problem is even worse. The carry cost as a percentage of assets under management is punishing.
The solution isn’t a smarter Bitcoin strategy — it’s a fundamentally different asset structure.
Why Music Royalties Work
Music royalties share a defining characteristic with the best collateral assets in institutional finance: they’re contractually obligated, recurring, and resistant to economic cycles.
When an artist’s catalog earns royalties from Spotify, Apple Music, and radio airplay, that cash flow doesn’t care what the stock market is doing. It doesn’t care about interest rates. It flows because people keep listening — and people always keep listening.
Key structural advantages:
- Predictable cash flow: Historical royalty statements provide 3–10 years of verifiable income
- Multiple revenue sources: Streaming, radio, sync licensing, performance rights — no single point of failure
- Inflation-resistant: Streaming deals are priced in USD and often escalate with platform growth
- Legally protected: Music IP is governed by federal copyright law with decades of enforcement precedent
These characteristics make royalties excellent collateral for senior debt — the same logic used by Concord, Hipgnosis, and Shamrock Capital to raise billions in asset-backed financing. The difference is what BARS Fund does with that debt.
The BARS Fund Structural Innovation
Traditional music catalog companies do the same thing with their collateral: they borrow against royalties to buy more royalties. Acquire IP → lever it → acquire more IP → repeat.
BARS Fund does something different. We borrow against royalties to acquire Bitcoin. The royalty income services the debt. Bitcoin appreciation builds the treasury. The result is a dual-asset portfolio where:
- Royalty yield covers debt service (interest-only, typically 10% on senior debt at 50–60% LTV)
- Bitcoin appreciation builds uncorrelated upside above and beyond what a pure royalty fund could deliver
- Bitcoin staking yield (targeting ~4% compounding) provides an additional income layer that pure Bitcoin holders leave on the table
This structure transforms a traditionally illiquid, income-only alternative asset into a vehicle for asymmetric growth — without requiring investors to take on pure Bitcoin volatility with no income floor.
The Math Works at Any Scale
The BARS Fund model scales from an individual artist pledging $2M in recurring royalties (which values at $20M at 10x, supporting $12M in senior debt deployed to Bitcoin) to a $100M equity structure acquiring catalogs outright and deploying $180M into Bitcoin.
At conservative Bitcoin appreciation of 20% annually — well below Bitcoin’s historical 60% average — both structures project compelling IRRs that significantly outperform either royalties or Bitcoin alone.
The combination is the alpha. Neither asset alone produces what they produce together.
For institutional investors who want Bitcoin exposure with structural downside protection, music royalties aren’t just collateral. They’re the architecture that makes the strategy viable.
Erik Mendelson is the founder and CEO of BARS Fund. To request investor materials, contact erik@recordgram.com.