Digital sales of music, video and games exceeded £1bn for the first time in the UK last year, as demand for downloadable content grew by 11.4 percent, despite the entertainment market shrinking overall.

Game

Physical media still claims just under three quarters of the British entertainment market, but the increasing catalogue of downloadable content and faster internet connections means continued growth in digital sales.

Provided by the Entertainment Retailers Association (ERA), the data reveals that digital music sales were up 15.1 percent from 2011, video was up 20.3 percent and downloadable videogame sales increased by 7.7 percent.

ERA director general Kim Bayley said: "The combination of a myriad of exciting new devices and compelling new digital retailing services is clearly exciting customers. What is most striking is that these figures do not even include the impact of streaming services like Spotify, Deezer, We7 and Rdio, for whom full market value data is not yet available."

A separate report by the BPI and Official Charts Company announced that 3.7 billion music tracks were streamed from the likes of Spotify in 2012, equating to 140 streamed songs per household, or nearly 34,000 years of music.

Video game sales made up for more than half of the £1bn total, as the UK spent £552.2m on downloading games in 2012, making the sector worth more than digital sales of music and video combined, at £383.3m and £97.9m respectively.

Although it accounted for less than 10 percent of the £1bn total, video downloads grew the most, up 20.3 percent on the previous year, but more impressive was growth of 15 percent by the music sector, by far the most established of the three digital markets.

Physical

As for physical entertainment sales, all three markets saw a decline in 2012; CD sales fell 14.9 percent, DVD and Blu-ray fell 11.4 percent, and physical videogame sales dropped by 26.4 percent.

Bayley added: "Despite digital's seemingly inexorable growth, the CD, the DVD and the physical games disc show incredible resilience. It is nearly nine years since iTunes launched in the UK yet over 60 percent of music sales are still accounted for by physical formats.

"It is clearly way too soon to write off the CD, and in video digital barely gets a look in. Physical formats still account for three quarters of the entertainment market."

Overall, the entertainment market shrank in 2012, with combined sales of music, video and videogames across physical discs and digital downloads down 12 percent to £4.21bn. The biggest fall was suffered by videogames, down 17.4 percent compared to 2011, and this is being blamed by the ERA on the sector reaching the lowest point of its format cycle, as replacements for the PlayStation 3 and Xbox 360 are both due this year.

The ERA director general added: "Suppliers need to do more to re-balance their release schedules and improve the quality of their releases. No retailer can afford to pay overheads on a store for 52 weeks of the year if all the key releases are going to be concentrated in the last quarter.

"And entrepreneurs will think twice about investing in new digital services if releases fail to excite the public. Luckily the message appears to be getting through and we look forward to being able to offer the public a much better release slate in 2013."