Digital sales of music, video and games hit £1bn in the UK for the first time last year, according to year-end figures published by the Entertainment Retailers Association (ERA).
Digital sales grew 11.4 percent during 2012, hitting £1.03bn, which means that digital content now accounts for a quarter of the entertainment market.
But music, video and games on physical media formats such as CDs, DVDs and Blu-ray still account for over three quarters of the entertainment market - despite falling by 17.6 percent.
"Breaching the £1bn barrier is an incredible achievement for the UK's digital entertainment retailers and reflects their huge investment in new and innovative services which means you can buy music, video and games literally at any time of the day and wherever you are," said ERA director general Kim Bayley in a statement.
But she said that at the same time many people will be surprised to learn just how resilient the physical business still is. "Downloads offer convenience and portability, but people still seem to value the quality and tangibility of a physical product."
More than half of digital sales came from video games, which grew eight percent to £552m. Spending on games accounts for more than the digital sales of music and video content combined.
The ERA statistics combine data from the Official Charts Company, GfK Chart-Track, and IHS Screen Digest. But Bayley said the figures do not include the impact of streaming services such as Spotify because this type of data is not yet available.