My Music Business Epiphany

There are three major shifts under way in the music content ownership business, and music consumption will never be the same.

First, the two negative shifts:

1. Unbundling: The average selling price of a unit of music content has fallen from about $15 per CD or so to about 99 cents, because the world over can now buy just the single songs that they want instead of being forced to buy an entire album bundled with that song.
2. Piracy: Every day, millions and millions of songs are stolen off the piracy networks, and there's nothing the music labels can ever do to stop that.

Now the positive change:

With the advent of the Internet, and the ability to purchase and consume any piece of music ever recorded immediately, the addressable market for music ownership has exploded.

And the latter is ultimately going to be a more powerful business dynamic than the former.

Yesterday when I was on the street talking to strangers in front of the Apple (AAPL - commentary - Cramer's Take) store, I figured out that the best way to put people at ease was to first ask a very simple question: "Do you like music?" No surprise that every one I talked to answered affirmatively. Love of and consumption of music are universal truths.

At one point, I badmouthed radio to an older couple who told me they love the radio. They were shocked and asked me, "What's wrong with the radio play lists?" The thing is, I'm utterly sick of top-40 music. Isn't everybody? And aren't there implications to that?

At a recent dinner with a group of Hollywood and music agents and managers, we debated the future of the business of music. And the debate took me back to New Mexico, as I remembered my mom telling my brother when he was starting his first heavy metal band in high school that he needed to make sure they covered some top-40 songs so that people could relate to them.

The debate covered topics that I've been writing about for a long time, from the decline of bundling to piracy to immediate access to all music ever recorded.

As I noted above, the first two topics are obviously negatives for the music industry, and one look at what has been a steady, several-year-long decline in music sales tells the story clearly.

But the latter point is finally starting to kick in, and I believe the music contentownership business might be in better shape than I've previously argued. That is, I was wrong that the value of music content would be more affected by the former points than the latter.

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Cody Willard is the manager of a hedge fund, author of The Telecom Connection, a newsletter published by TheStreet.com and a contributor to the Financial Times and VON Magazine. He is also a regular guest on CNBC's Kudlow & Company and an adjunct professor at Seton Hall.

He earned a bachelor's degree in economics at the University of New Mexico. Willard appreciates your feedback -- click here to send him an email.