Digital sales of video grew by 40% in 2013, helping to offset a 6.8% decline in sales of physical formats.
Music streaming, meanwhile, saw a 33.7% rise and now accounts for nearly 10% of consumer revenues from recorded music.
The overall UK music, video and games market was worth £5.4 billion in 2013, up 4% on 2012's total of £5.1 billion.
Kim Bayley, director general of the Entertainment Retailers Association (ERA), said this was "a stunning result after at least five years of decline".
Digital video, which includes iTunes downloads as well as streaming services like Netflix and Lovefilm, made up 30% of 2013's total video sales of £2.06 billion.
Skyfall, the latest James Bond film, was the year's biggest-selling video, having shifted 2.96m units since its release in February.
The first instalment of the Hobbit franchise, An Unexpected Journey, was the second biggest seller, having sold 2.06 units since its release in April.
The picture for the British music scene is not as rosy with overall sales falling by half a percent.
Physical sales of music have fallen by more than 7%, while digital sales' 3.5% rise is lower than a 15% percent boost seen in the previous year.
The slack has been picked up however, by streaming of music via such services as Spotify and Deezer which saw subscription revenues rise to £103.1m, according to estimates from the BPI (British Phonographic Industry).
The trade body put the total value of UK recording music sales at £1.04 billion. Digital sales, not including streaming revenues, account for around 40% of that total.
Story courtesy of bbc.co.uk