It's paramount.
You're not trying to just learn technique or a series of techniques. Not just "theory". You absolutely have to couple that with experience in context, or it means nothing.
"Music theory" is NOT a set of instructions. It does not tell you what to do. It *can* be used as a sort of default decision-maker when you're left with no ideas.
Why would you have no ideas, though?
Because there is an old saying in computer programming: GIGO - "Garbage In, Garbage Out". If you "feed" your musical mind with junk, you're going to have junk ideas. Furthermore, if you don't feed it anything at all, you're not going to have any ideas!
So you have to listen to, and love music. But to harness it you have to learn it. Not just one song, but a lot of songs, and a lot by at least one artist. That gives you a context to work from. Without that context you're left with theory. Which is like having a dictionary and wanting to build a car by reading the definition of "combustion engine". You've got to have hands-on experience with what a car is. Not just pictures, not just definitions, not just videos of people telling you what they are.
I would guess from what I've seen of students, you've got to get in the ballpark of around 30 songs on the low end, optimistic side, to a more realistic 50+ songs before you've "fed" your brain enough info to start having creative ideas. notions of how *you* would want a piece of music to do.
This used to be something of a default in the process of becoming a musician, because there was a time when at least half of everyone I taught inevitably ended up in the proverbial First Cover Band, where one was required to learn a set of music in order to perform in front of an audience.
For whatever reasons this process vanished a few years ago. Some people play at church, but this is not the same process as getting together with friends/people of similar tastes, playing music YOU decided you like. You end up learning more, practicing more, and being more enthusiastic about music in general. That's not to say playing at church can't be fun, but it's usually a more regimented environment where someone has predetermined what the music will be, with limited rehearsal.
That initial impetus of "I want to play in a band!" used to get a lot of people to that 30 song mark. I think now people look at YouTube and feel the bar has been raised so high that there is no point, and that's a fallacy. For every "perfectly groomed perfectly executed pop band" you see on YouTube there are a 100 you don't see that are having fun, performing without the artificial "reality" of YouTube being the goal. Having said that, there is nothing to keep a "band" from "performing" on YouTube - I've seen bands do this, I think it's a good idea.
Why people don't do it is because they don't realize that all of the greatest bands on the planet at a nascent period where they weren't great. You're only seeing the end result, and on YouTube under the Most Ideal Conditions. The term "garage band" has completely legit origins, and everybody you like musically has probably been in a "garage band" at some point.
So you've got to learn songs, even if it's in the context of a "virtual band", or from mere self-discipline, sense of accomplishment standpoint. I got in my first band because I'd already learned "a lot" of songs on my own, which allowed me choices I wouldn't have had initially otherwise. I'm telling you, things will always seem confusing a good bit until you cross that 30 song threshold, so the sooner you get there the better!
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