Musicians find a fast-track to iTunes

(Fortune) -- Public Enemy's Chuck D. has spent his career rapping about the effects of racism in America. The self-described "prophet of rage" isn't too happy with the music industry either.

He feels that for too long the major labels, black radio stations and music television networks like MTV have made it difficult for him to get his "pro-black" message out to fans.

TuneCore CEO Jeff Price says music artists don't need the major record labels to become hits.

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To circumvent these industry gatekeepers, Chuck D. started his own record label, SlamJamz. Now he's distributing Public Enemy's new album, How Do You Sell Soul to a Soulless People Who Sold Their Soul???, directly to his listeners with the help of one of the most intriguing digital music companies to emerge in some time: TuneCore.

TuneCore, based in Brooklyn, N.Y., is the brainchild of Jeff Price, a music industry veteran who, in his own way, is as much a radical as Public Enemy's front man. Price's proposition to aspiring musical artists is nothing less than this: You don't need MTV (Charts). You don't need Clear Channel (Charts, Fortune 500). You don't need SonyBMG.

For $30 - "The cost of a six-pack and a pizza," says Price - TuneCore will get your ten-song album on iTunes. It will also give you tips on inexpensive ways to attract buyers. TuneCore users keep all the revenues from their song sales - after iTunes takes its cut. They can see how much money they are making online and withdraw funds anytime from their account. They also retain all ownership rights to their work.

You can see why Chuck D. is such a booster. "It dovetails with our politics," says the rapper. "I'm looking for SlamJamz to be a prototype label for TuneCore to show people there is a way for them to get interactively involved" with the digital music business.

TuneCore's other famous users include Ziggy Marley, MC Hammer, Guns N' Roses' Izzy Stradlin, Ricky Skaggs and the Cure's Roger O'Donnell. TuneCore doesn't disclose it revenues, but Price says they've been growing from month to month by 15 percent. Last December, Guitar Center bought a majority stake in the company for an undisclosed sum. Now TuneCore is in its second round of fundraising.

Price, 40, says his company is the next logical step in the reordering of the music industry in the digital age. For years, he ran a record label called SpinART, whose roster included such indie darlings as Frank Black, the former singer of the Pixies, and bands like Apples in Stereo.

However, Price became disillusioned with running a label in 2005 when he lost money on a record by a well-known artist he prefers not to name publicly. What really irked him was that everybody else involved in the sale and distribution of the record got paid - from the CD manufacturers to the U.S. Postal Service to the paper company that provided the album's booklet.

"It finally kicked in with me that the service side of the industry is doing well," says Price. "It didn't matter to them if the music sold or not."

Then Price had another epiphany. His friend Gian Caterine, now TuneCore's CFO, wanted to get his music on iTunes. But he had a problem. Price says iTunes doesn't do business directly with individual artists. Those without major label deals generally have to go to so-called aggregators like IODA and the Orchard.

But Price says these companies operate much like traditional record labels, signing artists for as long as five years and keeping a percentage of the revenues from each digital sale. Price felt there was plenty of money to be made by simply charging people to get on iTunes and leaving it at that.

TuneCore's rapid growth since it was launched in December 2006 seems would seem to prove him right. TuneCore has surely benefited from Public Enemy's enthusiastic endorsement. But Price says the company's real growth potential lies in appealing to unknowns.

He points out that half of all U.S. households have at least one music maker and that computer programs like Apple's (Charts, Fortune 500) Garageband have made it much easier for them to make professional-sounding recordings.

"I care about Chuck D.," says Price. "But this business model is about creating a marketplace that didn't exist before."

The bigger question for Price is how do all these nobodies really get heard? It's easy to see why Chuck D. is enamored with TuneCore. He doesn't really need a major label. He's already famous.

The vast majority of TuneCore's users aren't so lucky. Price is full of suggestions. He advises them to get their songs posted on the same MP3 blogs that launched red-hot bands like Arcade Fire.

He tells them to cover songs by famous artists and to make playlists using some of their own songs and those of established acts. "One of our artists was just the iTunes free download of the week," he says. "We really enable our customers to be their own cottage industry."

It may take more than that for many of TuneCore's customers to get noticed on the Internet. There are times when Price sounds a tad too glib about the prospects of his customers. If they want to have long and lucrative careers, they may need big radio stations and MTV.

But Price doesn't. He's not selling albums anymore. He's found a better business model.