When a customer buys an eligible DVD from Amazon, the digital version instantly appears in their Amazon Video On Demand library. If they get a rental version of the digital copy, it can be downloaded within 30 days of the initial disc purchase; if it’s a purchased digital copy, it will be in their library forever. All digital titles can be viewed on the user’s computer or through more than 200 different connected devices, such as TVs, Blu-ray players, TiVo DVRs, Roku broadband set-top boxes, or Google TV-enabled devices from Sony and Logitech.

Amazon has enabled its customers to download digital copies of discs they purchase since late last year, but the list of available titles that were part of the program were fairly limited. That’s now changed, as the offering is now available for thousands of titles. The expansion of the program could draw some interest from videophiles that want instant gratification, or perhaps just want to own a digital version of the file out in the cloud, as backup.

For now, that will be a fairly niche market. But as my colleague Liz Shannon Miller noted yesterday, programs like Amazon’s Disc+ On Demand service and Walmart’s Toy Story 3 promotion might be ways to introduce consumers to new ways of viewing content online and (increasingly) through connected TV sets and other devices. With optical discs on their way out, it’s more important than ever for retailers like Walmart and Amazon to attract new business by introducing digital forms of delivery.

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So far, only a tiny fraction of all DVDs available on Amazon seem to be part of the promotion. The site currently lists a little more than 300 titles as eligible for free instant viewing. All in all, Amazon offers more than 330,000 DVDs. Still, if you’re in the market for a copy of Coraline or Land of The Lost, you might want to check out the new offering. After all, this sounds like a great way to buy a holiday present for someone that you can enjoy yourself as well without having to explain the missing shrink-wrap plastic.

Amazon is clearly just dipping a first toe in the water with this promotion. In fact, the company is calling the free VOD a “gift with purchase,” which could fend off any legal challenges from its competitors. The company also added a bunch of legalese, stating that the “promotion is valid for a limited time only.” Disc+ On Demand is limited to standard-def streams and downloads, and customers who return the physical disc will be billed the regular VOD price.

Despite those restrictions, Amazon is likely watching this promotion closely. The industry has long been struggling to find ways to make physical discs more appealing in the age of digital downloads. Various studios have started to include digital copies of their movies on Blu-ray discs, and some reports see as many as 20 percent of all consumers making use of this feature to watch a copy of their movie on a laptop or other portable devices. However, the effect this may have on sales is unclear.

Amazon could, on the other hand, see a direct impact to its bottom line if it were to expand Disc+ On Demand to a wider array of titles. With DVD sales slumping and more and more users moving toward other non-physical formats, anything that could make a consumer shell out 20 bucks or more for a Blu-ray disc as opposed to $3.99 for a VOD rental seems like a good idea for a retailer.

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