The overall UK music, video and games market reached £5.4bn during 2013, a 4% rise over 2012, mainly driven by booming digital services such as Netflix and Spotify, a new report revealed.
According to a new report from Entertainment Retailers Association (ERA), digital video downloads and streaming has risen 40.2%, reaching £621.4m.
Services from iTunes, Netflix, Amazon's LoveFilm and Blinkbox are now widely available, helping the UK market figures soar after at least five years of decline.
Britain's music industry also expereinced a digital revolution through Spotify and Deezer as the number of tracks streamed doubled and reached 7.4bn.
"Retailers have invested hundreds of millions of pounds in new digital services and these numbers suggest the public is responding in their droves," Bayley said.
The year also witnessed a drop in combined sales of digital and physical albums by 3.6% in value to £772m, while digital sales value rose by 40% to £621m.
"Video has done well to maintain its physical presence while enjoying strong digital growth," Bayley added.
"The challenge for video companies in 2014 will be to establish attractive physical formats which offer digital copies which enable them to hang on to valuable store space."
Revenue generated by digital gaming, however, surpassed physical sales of video games, which dropped by 2.9% to £1.01bn, while maintaining an overall 6.6% rise in market growth to £2.2bn.
The video game Grand Theft Auto V became the single biggest-selling entertainment title in the UK last year, with its sales reaching 3.67m copies.
"Games continues to deliver digital sales strongly, but it was disappointing that Xbox One and PS4 came so late in 2013 and then huge demand meant stock sold out quickly," Bayley added.
"Retailers will be working hard in 2014 to maintain the sales momentum of these two great new pieces of kit."