The Entertainment Retailers Association (ERA) said a final year-end tally of £1.033bn was reached, giving a digital sales boost of 11.4% year-on-year.
ERA director general Kim Bayley said: "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."
Traditional disc sales of CDs, DVDs, Blu-ray and games still account for just over three quarters of the entertainment market, despite falling by 17.6% compared with 2011.
ERA represents entertainment retailers, specialists and independents, as well as supermarkets outlets along with internet and download retailers.
It combines data from three separate sources to collate the industry-wide figures.
The biggest digital sector by far remains games, mainly comprising massive multiplayer online games, social gaming and online console transactions.
Topping £552m, it was worth more than digital sales of music and video combined.
The video sector showed most growth at 20.3% but this reflects the relatively undeveloped nature of the market, according the ERA.
Music's digital growth of 15.1% also stood out as it is the most established of the three markets, with 16 albums selling more than 100,000 digital copies in 2012 and more than 3.7bn audio tracks streamed.
The Official Charts Company said Somebody That I Used To Know by Gotye (featuring Kimbra), Call Me Maybe by Carly Rae Jepsen and Titanium (Other OTC: TTHG - news) by David Guetta (featuring Sia (SES: E1:C6L.SI - news) ) were the three most-streamed tracks in 2012.
Ms Bayley added: "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.
"Downloads offer convenience and portability, but people still seem to value the quality and tangibility of a physical product."
The news of the £1bn digital barrier breakthrough comes amid a drop in total sales of 12% for physical and digital products compared to a year earlier.
The ERA said combined game sales dropped 17.4% in 2012 and said a factor in the fall was poor release planning which affected retailers.
"The dearth of attractive releases during summer 2012 was clearly a significant factor," Ms Bayley said.
She added: "Suppliers need to do more to rebalance 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."
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