2008 RETAILER OF THE YEAR: Amazon is a giant in Blu-ray

With a movie selection that surpasses all other retailers and an ability to reach a broader cross-section of customers in a way that few others can, Amazon.com has solidified its place as a leading Blu-ray destination over the past year.

Its aggressive push for the format has resulted in a Blu-ray market share 3.5 times that of its DVD market share, according to studio sources who also credit the retailer with driving Blu-ray sales.

At the same time, the company has continued to innovatively merchandise all home entertainment, reaching customers through boutique movie pages and sister movie site IMDb.com. Though competitors in digital have shuttered over the last year, Amazon revamped its Unbox download service to offer instantaneous streaming videos on both PCs and Macs to make it more appealing to consumers.

The retailer says the efforts are all part of its broader goal to serve customers the best that it can.

“It’s clearly no surprise that Amazon.com has the highest customer satisfaction and loyalty ratings,” says Universal Studios Home Entertainment president Craig Kornblau. “When you look at the amazing convenience, the incredible product selection, amazing values and unrivaled customer service, it’s why it’s America’s first choice for online shopping.”

Though it has slowed from the previous year, Amazon’s media business, which includes DVD and Blu-ray Disc sales, grew 19% during its most recent quarter. Amazon’s strong position in home entertainment comes as the retailer marks its 10th year in the video business.

“Amazon has been ahead of its time ever since the site first launched in 1995,” says Lionsgate executive VP and general manager Ron Schwartz. “The company has firmly established its position as the leading online retailer by understanding that its core consumer is technologically savvy and wants easy access to the newest and best products on the market.”

That core consumer overlaps nicely with early Blu-ray adopters, to whom the retailer has eagerly catered. Blu-ray is a centerpiece in Amazon’s High-Def Headquarters, an area of the site that serves as a primer on high-def entertainment. It’s also prominently featured on the main homepage with a link in the drop-down menu between “Movies & TV” and “Video on Demand.”

“We only do it for parts of our business that we think are really important to customers,” says VP of movies and music Peter Faricy.

Beyond that, Amazon has used its signature formula that combines broad selection with low prices to win over Blu-ray adopters. The site now carries 1,400 Blu-ray movies, claiming more than any other retailer partly due to exclusive releases such as Sony Music’s Beyonce Live.

“One of the most important things for customers who are early adopters is selection,” Faricy says. “What’s important is that we have been aggressively working on behalf of our customers to get more and more content on Blu-ray. We really feel like customers that are Blu-ray adopters want an exhaustive selection.”

Most of those Blu-ray releases are discounted 40% below their list price on the site. The retailer also offers discounts by bundling movies together and with Blu-ray players to encourage more consumers to make the switch.

Marshall Forster, Sony Pictures Home Entertainment senior executive VP, says Amazon has been a key retailer pushing Blu-ray from the start. “Obviously, the Amazon customer is very much aligned with the Blu-ray early adopter,” he says. “In addition, the Amazon shopping experience, with its rich ability to communicate with customers and educate them as to the benefits of the format, has been a great driver of the format.”

Amazon has incorporated Blu-ray marketing and merchandising throughout its site and on sister movie site IMDb.com through a host of new initiatives launched in the last year.

It has introduced boutiques for such major releases as Warner Bros.’ The Dark Knight and Walt Disney’s WALL-E, pulling all merchandise for a property together on one page to cater to fans. Similarly, Amazon has created pages for top TV shows that include all Blu-ray, DVD and video downloads available.

Faricy’s group has worked with IMDb to incorporate links to DVD and Blu-ray sales on the site, reaching beyond Amazon’s core customers. “Many of people who are interested in IMDb are some of the biggest enthusiasts of movies,” he says. “Movie enthusiasts are also early adopters.”

The retailer also stays connected with users on future releases, allowing customers to sign up for alerts when a movie they want is released. In turn, the retailer lets studios know what releases Amazon film buffs are hunting for.

Despite its Blu-ray push, the retailer says its main goal is to offer the broadest selection of films regardless of format. “We’re not trying to push customers to one format,” Faricy says. “Our goal is to be format agnostic.”

That includes digital, which has been slow to take off. In July, Amazon revamped its Unbox video download business to offer instantaneous Internet viewing in response to customer feedback and renamed the service Amazon Video on Demand. Bill Carr, VP of digital music and video, says the goal was to allow consumers the easiest way to watch shows on any computer platform without having to download a proprietary video player.

“People love the simplicity,” says Roy Price, director of Amazon Video on Demand.

To further boost digital sales, the retailer has begun bundling downloads with DVDs in different ways. For The Dark Knight, Amazon allowed customers who bought the DVD to watch the movie immediately online. The retailer also has offered downloads of some films for 99¢ to customers who buy the DVD, and alternately cut $3 off the price of the DVD to those who rent the film on VOD.

The retailer is now focused on bringing Amazon VOD to more devices in the home beyond TiVo and Sony Bravia TVs on which it is now offered. “The reason why the DVD business is such a large business is because consumers can buy or rent DVDs knowing they will play on any DVD player they own,” Carr says. “It may not sound glamorous, but it’s really not very complicated—customers want to be able to choose anything available in video to watch where they want to watch it, how they want to watch, and do it at low price.”