The entertainment market is now three quarters digital, while the video games sector now accounts for more than half of the UK's entire entertainment market, according to a new report.

Booming streaming services helped the UK entertainment market to another all-time-high of £7.537 billion in 2018, according to preliminary data compiled by the Entertainment Retailers Association (ERA).

After a sixth successive year of growth for the UK entertainment market, driven by digital services from the likes of Spotify, Steam, Netflix, Amazon, Deezer, Sky, Apple and Google, digital revenues accounted for more than three-quarters (76.1 per cent) of entertainment sales value in 2018, according to ERA figures.

On a market level digital revenues now dominate all three sectors, with digital generating 80.1 per cent of games revenues, 72.3 per cent of video and 71.3 per cent of music.

Nevertheless, new analysis shows physical formats are essential to deliver the biggest hits. On a title level, ERA analysis shows physical disc sales are still crucial to deliver the biggest hits with sales of the top 20 films to own of the year averaging 74.1 per cent physical and the Top 20 albums of the year averaging 61 per cent physical.

The biggest music and video hit of the year, Hollywood musical The Greatest Showman, sold nearly two-thirds of its combined 4.3 million sales on CD, DVD and Blu-ray. The biggest-selling console game of the year, FIFA 19, sold 2.5 million units, around three quarters on physical formats.

ERA chief executive Kim Bayley said: “In music even today more people buy CDs than pay for streaming subscriptions and in video more homes have DVD players than subscribe to all the leading video services put together.

"The challenge for physical retailers is to tap into this huge market of occasional buyers.”

The biggest winner in entertainment’s digital transformation has been the games sector.

For the first time in 2018, ERA reported that games accounted for more than half of the entire UK entertainment market (51.3 per cent). More than any other sector, games has benefited from a proliferation of new services from direct to console downloads to mobile and social gaming.

The physical console and PC games market shrank slightly in 2018, down 2.8 per cent to £769.9 million, and digital growth was by recent standards a modest 12.5 per cent to £3.094 million, but the sheer scale of the games market is such that it was enough to make it bigger than video and music combined.

Now worth £3.864 billion, the games market has - thanks to digital - more than doubled in value since 2007.

Bayley added: “The games industry has been incredibly effective in taking advantage of the potential of digital technology to offer new and compelling forms of entertainment. Despite being the youngest of our three sectors, it is now by far the biggest.”

Music registered its fourth successive year of growth in 2018 thanks to streaming with revenues generated by services like Spotify, Apple, Amazon, Deezer and Google/YouTube growing 37.7 per cent to £829.1 million.

The switch away from downloads continued with single track downloads down 25.5 per cent over the year and album downloads down 26.3 per cent.

Physical formats performed less well, with CD unit sales down another 23.1 per cent. After a decade of growth, vinyl album sales grew just 1.6 per cent.

The music sector is now 30 per cent bigger than it was at its 2014 low-point of £1.03 billion, but it is still well off its 2001 peak of £2.11 billion.

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