TuneCore is poised to partner with Amazon’s on-demand CD-printing-and-distribution service, Wired.com has learned. It’s a deal that could put powerful new physical publishing options in the hands of musicians, even as the world goes increasingly digital.

The service is expected to be announced Thursday, linking Amazon with TuneCore, a novel digital distribution startup that’s made waves signing the likes of Trent Reznor, Keith Richards and other stars seeking a way out of the label system, as well as slews of garage bands and hopefuls on their way up.

Tunecore will charge just $31 a year in upfront fees to handle a 10-track CD from pressing to delivery, passing all other costs through to the buyer. In other words, the service promises to remove nearly all of the risks of short-run CD manufacturing, which can cost musicians hundreds or even thousands of dollars for discs that rarely sell enough to cover expenses.

“As an artist, you have unlimited physical inventory, made on demand, with no upfront costs and worldwide distribution to anyone who orders it at Amazon.com,” said TuneCore CEO Jeff Price, formerly of indie label SpinArt Records (Pixies, KaitO, Apollo Sunshine).

The deal comes as physical music sales are tanking and as major CD distributors like Amazon seek to evolve to a digital model. Yet Price suggests that there may be life left in good old physical storage media, with a slight twist. Why would people buy music on CD if it’s also available in iTunes, Amazon MP3 and other digital stores?

“Why not?” responds Price, who says he believes the costs are so low it will makes sense for lots of bands to try it out. “Let the music fan decide how they want the music.”

In addition to competing with downloads and streaming, one obvious drawback to this model is that you can’t sell an on-demand CD at shows, where enthusiastic fans are most likely to pick one up. But Price says labels wondering why artists still need them now have yet another thing to worry about. When you can sell CDs on Amazon for 30 bucks, who needs a label? Certainly not Reznor, an early TuneCore adopter who once paid the service 38 bucks to distribute a quadruple-length album through Amazon MP3.

Amazon already offered on-demand CD printing through its CreateSpace acquisition, for a flat fee of $5 per disc. TuneCore’s massive footprint means far more bands will use that service, because it’s now just another checkbox in the system they already use.

For TuneCore, the deal expands its primary business helping indie artists get digital distribution through online outlets such as iTunes, Napster and Amazon MP3. TuneCore will now compete directly with CDBaby, the current leader in low-volume CD manufacturing and distribution. CDBaby charges $278 for 100 discs, although it recently lowered its minimum order to just five copies.

Brooklyn-based TuneCore gave us a peek inside its accounting system, which shows the most successful artists on the service regularly earning upwards of $20,000 per month. Chump change this is not.

As with its digital distribution service, TuneCore passes 100 percent of Amazon’s payout to the artist — about 40 percent of the retail price. If one of Amazon’s 80 million customers buys your 10-song CD on Amazon for $8.98, you’ll receive $3.59. After selling just nine discs, you’re in the black. TuneCore takes care of the UPC code, artwork, bar code, CD label design and so on, so that artists can concentrate on writing songs — and cashing checks.

The on-demand CD partnership with Amazon is just the latest in a long string of successes for the 2006 startup, whose distribution catalog dwarfs those of the labels.

“There’s more music released in one day on TuneCore than there is on a major [label] in the course of a year — in three days, more than all the majors combined, and within a month, all the majors and indies combined,” explained Price. “TuneCore artists have generated over $32 million in revenue from music sales over the past 22 months.

“Some of the artists, frankly, have been selling more than the Billboard Top 40 artists,” he added. “It’s just not being picked up by the mainstream places [like SoundScan] that track sales.”

As their label contracts expire, some fairly heavy hitters are signing up for TuneCore. In addition to Reznor and Richards, the service now handles distribution duties for Joan Jett and other luminaries. But unsigned bands are always found among TuneCore’s top sellers. For instance, Never Shout Never sold over 250,000 songs in 60 days, as well as 30,000 T-shirts (also handled by TuneCore).

Universal Music Group — the biggest record label in the world — has also partnered with TuneCore to offer additional services to its indie artists. For $50, Universal’s Grammy-winning producers will master your music for CD before it gets distributed. And for another as-yet undisclosed fee, Universal’s art department will also design the high-resolution PDF that iTunes now requires with each album submission — all they need is four images and the names of your songs.

TuneCore has other plans in the works:

• Amazon will launch a TuneCore-branded section next month.
• A TuneCore widget will soon allow bands to distribute tweets and songs to fans.
• If you sell 100 songs in the New York or Los Angeles area, you get to play Le Poisson Rouge or The Roxy, earning a guaranteed minimum of $100 — even if no one shows up.
• TuneCore is working on a deal with live music behemoth Live Nation/House of Blues that would give artists who sell a certain number of songs a live gig, also with a minimum guarantee of $100.
• If you sell enough songs through TuneCore, MusicNotes will score one of them into downloadable sheet music so that others can learn how to play your music.
• Another deal rewards bands who sell a certain number of songs with 16 packs of Ernie Ball guitar strings and 8 packs of bass strings for free, every month.
• Yet another deal lets bands who hit certain metrics offer fans the chance to wrap Blackberries, computers and other gadgets with an image of the artist.
• A TuneCore iPhone app will soon allow 30-second and full-song streams for participating bands.

Here’s how you can distribute a CD through Amazon using TuneCore. Once you’ve signed in, click Add Album:

Then you enter some basic information and choose which stores you’d like to stock the album:

Here’s the part that deals with Amazon’s on-demand CD service:

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Then it’s time to pick a cover for your CD. There are hundreds of options, and you can upload your own artwork:

Add tracks and liner notes, and you’re just about there:

Pick a design for the disc itself, and you’re done — now, all you have to do is wait for those Benjamins to roll in: