More than a billion pounds was spend on digital goods for the first time in 2012.
Sales of movies, music and video games online hit the record total, up 11.4% over last year, as traditional retailers continue to suffer.
According to the figures released by the Entertainment Retailers Association, more than a quarter of all sales in the entertainment market are digital.
And the real total could be even higher, as the figures do not include several key drivers of digital revenue, including books, music and video streaming services and some app stores and video game sellers.
The biggest digital revenue driver last year was video games, which garnered more than half of the digital market with £552m in total sales.
Digital sales of music were up 15.1% in twelve months, to £383m, while movie sales rose 20.3% to £98m.
But in the shops - and online - sales of DVDs, Blu Rays and boxed video games continued to plummet.
Overall sales of 'physical media' declined by 17.6%. While that still makes up the majority of total sales - close to 75% - analysts said a 'crossover' point was now in sight.
HMV, one of the UK's largest - and last-remaining - sellers of DVDs and CDs experienced a tough 2012, leading it to warn in December about "material uncertainty" for its future.
Kim Bayley, director general of the Entertainment Retailers Association, told the BBC the figures were an "incredible achievement" for digital retailers.
"This 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," she said.
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