Streaming services led by Netflix, plus time shifting, hurt home entertainment spending far more in 2014 than you would have thought from last week’s year-end report from DEG: The Digital Entertainment Group – and will continue to damage the industry in 2015 – MoffettNathanson Research’s Michael Nathanson says this morning in a bracing examination of the trade group’s numbers. Indeed, the analyst warns that “the recent cracking in consumer demand might create an additional (and unexpected) negative revision” in earnings estimates for the major studio owners: home video accounts for 10% of Time Warner’s revenues, 8% at Fox, 6% at Viacom, and 4% at Disney.

DEG’s conclusion that last year’s domestic sales and rentals declined 1.8% to $17.8 billion is bogus, the analyst says, because it includes numbers from Netflix, Hulu and other subscription VOD (SVOD) services. “The DEG has never historically reported consumer spending on other premium products like HBO, Showtime, and Starz – or basic cable fees – so including the hypergrowth spending on Netflix and Hulu only artificially inflates the totals,” he says. They also don’t belong in the tally because they primarily offer TV shows while DVD and VOD are mostly about movies. Adding SVOD “is a red herring designed to puff up the numbers.”

When you take away SVOD, home-video spending declined 7.7% last year to $13.8 billion – a bigger drop than 2013 which fell 4.8% to $14.9 billion. He expects to see a 6% slide in 2015 to a hair below $13 billion, with results buoyed by home video releases of expected mid-year blockbusters including Furious 7, The Avengers: Age Of Ultron, Tomorrowland, Minions, Ted 2, and Ant-Man.

Couldn’t you just chalk up 2014’s woeful results to a bad year at the box office? Nathanson says no. Box office revenues tied to last year’s home videos were just 1.6% lower than in 2013. The latest numbers also included Frozen “which well outperformed any other title over the past few years.”  In addition, Nathanson finds it significant that DEG did not say how well Blu-ray discs sold last year. “We can only imagine this means Blu-ray was no longer a driver of growth in 2014.”

The bottom line: “2014 may serve as a warning that the industry may be on the precipice of returning to the decade-long declines before and after the recession,” Nathanson says.