Sales increased 11.4% from 2011, meaning that a quarter of the entertainment market is now digital.
But figures released later by entertainment retailers will also show a big drop in physical sales - more bad news for high street shops.
Sales of CDs, DVDs, Blu-ray and video games fell by 17.6% in 2011 although they still make up most of the market.
Kim Bayley, director general of the Entertainment Retailers Association (ERA), which will release the figures, said that breaking the £1bn barrier was an "incredible achievement" for retailers."
Source: BBC News, 2nd January 2013