In our discussion on the Apple iTunes/Apple Music settlement, it was brought up that one aspect of the settlement allows Apple to sell iPods (or other media) containing music files. This opens the door for a slew of targeted iPods, from near-disposable devices with a single, group of songs, or a single album all the way up to high-end versions containing an entire band’s catalog pre-loaded.

Flash-memory drives are now so cheap, software companies are starting to use them to ship software. H&R Block, for example, is selling the latest version of its tax-preparation software on a flash drive for $40 — the same price as the CD version. How much would it cost Apple to add a few music chips and some cheap earbuds?

Apple was prevented from doing this until now by the 15-year-old contract between Apple Corps, the Beatles’ music company, and Apple Computer. This contract precluded Jobs’ Apple from acting as a music company and from selling CDs or “physical media delivering prerecorded content … (such as a compact disc of the Rolling Stones’ music).”

Apple has been selling music as downloads for years, of course, but thanks to this clause, the company couldn’t sell an iPod with music already loaded onto it.

These cheap album iPods could be sold at bus stations and airports: instant music, no computer required. Bands could sell pre-loaded iPods at concerts, maybe containing the concert they just played. There could be Broadway show iPods, movie soundtrack iPods and iPods burned at retail stores with custom play lists.

It’s going to be the biggest change to the iPod since the iTunes online store debuted in 2002.

Do you agree that this could challenge the CD and other pre-recorded music?