Digital sales of music, video and games in the UK crossed more than £1bn for the first time in 2012, according to a new report from the Entertainment Retailers Association (ERA).

The report revealed that the digital sales of music, video and games increased 11.4% in 2012 to £1.03bn, compared to 2011, accounting for a quarter of the collective entertainment market.

Disc sales of CDs, DVDs, Blu-ray and videogames, which fell by 17.6%, still account for just over three quarters of the entertainment market.

ERA director general Kim Bayley said that breaching the £1bn barrier is an incredible achievement for the UK’s digital entertainment retailers and reflects huge investment in new and innovative services.

"At the same time I suspect that many people will be surprised to learn just how resilient the physical business still is – with three quarters of entertainment sales still on disc," Bayley said.

"Downloads offer convenience and portability, but people still seem to value the quality and tangibility of a physical product."

During the year, the games sector has been the biggest digital sector, mainly including huge multiplayer online games, social gaming and online console transactions, which topped £552m.

"The combination of a myriad of exciting new devices and compelling new digital retailing services is clearly exciting consumers," Bayley said.

"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."

The video sector reported highest growth of 20.3%, while the music’s digital growth of 15.1% also stood out with 16 albums selling over 100,000 digital copies and more than 3.7 billion audio tracks streamed during the period.

The report however added that the surging sales of digital formats have not been sufficient to prevent the entertainment market from decline.

The collective sales of music, video and videogames declined 12% to £4.21bn, with videogames reporting the highest fall of 17.4% during 2012.