Cape Town - The year 2012 saw the highest annual total spent on downloaded films, music and games with sales breaking the £1bn barrier, reports BBC online.
Sales increased 11.4% from 2011; however, a big drop in physical sales is expected when official figures are released.
Video games, which represent more than half of the digital sales, grew 8% to £552m while films increased by 20% and music by 15%, but both represent a smaller share of the digital market.
According to the report, director general of the Entertainment Retailers Association, Kim Bayley, who will release the figures, hailed the £1bn mark as an "incredible achievement" for 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.
"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," said Bayley.
In South Africa, the digital market developed relatively slowly due to limited internet access, with low broadband penetration limiting internet distribution because it is not easy to download from a home computer, according to PricewaterhouseCoopers (PwC).
In its first edition of the South African Entertainment and Media Outlook: 2010-2014, PwC predicts spending on digital is not expected to surpass spending on physical formats over the next five years.
However, by 2014 digital spending would be more than half that of physical spending, it said.
Follow Fin24 on Twitter, Facebook, Google+ and Pinterest.