"There's no question digital will overtake physical," said Xbox Europe marketing vice president David Gosen, as reported by MCV. "It happened in music and will happen to our industry."

Speaking at Microsoft's UK Gamefest development event, Gosen added that the success of Xbox Live Arcade and downloadable content for games such as Harmonix's Rock Band and Neversoft's Guitar Hero III illustrate a "convergence" in the industry, adding that "digital will be the dominant force in future."

Gosen's remarks follow Microsoft's earlier in which the company stated that paid content downloads had earned a total of $240 million, and boosted sales of those games supported with downloadable content by $21 million on average.

Microsoft isn't the only company banking heavily on digital distribution. This past June, Valve Software revealed that it expects online sales from its PC digital distribution platform Steam to dwarf its retail business as early as 2012.

Gosen reaffirmed Microsoft's commitment to heavy investment in Europe, noting that the Xbox 360's Xbox Live online service would see a renewed and reinvigorated focus with more games and entertainment content coming to the Xbox Live Marketplace in the territory.

"We have to think about how the consumer is changing and how the ways they are accessing media is changing," Gosen remarked.

Just what portion of music sales have gone digital remains an area of dispute; for example, data from the International Federation of the Phonographic Industry showed digital music purchases accounting for 30% of U.S. music sales in 2007, and 15% of music purchased worldwide.