Various usage reports in recent weeks suggest Netflix (NFLX 2.64%) is emerging as one of the big winners in the stay-at-home economy that's resulted from the stay-at-home efforts related to the coronavirus pandemic. 

It's not surprising given the company's position as the world's leading streaming company. With people around the world stuck inside their homes and other entertainment options like live sports unavailable, Netflix has seen viewership surge. Data from streaming aggregator Reelgood found that streaming activity from its nearly 4 million members doubled from the first week in March to the last, with Netflix capturing 41% of the market share -- far more than any of its competitors. 

An employee at the Netflix office

Image source: Netflix.

The Tiger King documentary has swept the nation, and there's been evidence of a streaming surge in Europe, as Netflix was asked to dial down its broadband use to standard definition to conserve bandwidth among internet providers in the region. 

The stock has bounced up about 50% off its March lows and is heading to its first-quarter earnings report on Tuesday at an all-time high and with big expectations.

However, while Netflix will likely smash its own guidance, which called for 7 million new subscriber additions, there are two longer-term concerns that could rattle the stock over the coming months.

The Hollywood shutdown

Until social distancing rules change, Hollywood studios will be shut down for the foreseeable future. The television and film industries suspended live-action production in mid-March as the extent of the coronavirus' spread became apparent. Hollywood isn't an industry that lends itself easily to social distancing as actors go through hair and makeup, need to be filmed interacting with one another, and collaborate off-camera. A film shoot, by definition, is a large gathering. 

Currently, Hollywood studios' most optimistic forecast for getting back to work is in July or August, and they expect to implement changes like virus testing of anyone going on set, a move away from location shoots, regular cleaning and disinfecting, and an end to cafeteria-style craft services.

While Netflix may be seeing a boom in subscribers, it's also seeing a spike in costs with live-action production shut down. Recognizing the emergency the industry is in, Netflix pledged a $100 million fund for support staff and crew members who are currently out of work. Netflix is also continuing to pay talent, including cast members, for episodes they were guaranteed per contracts, further adding to its costs while production is shuttered. 

However, the biggest challenge for Netflix may be that its content pipeline will start to dry up as the Hollywood freeze goes on. Chief Content Officer Ted Sarandos said that there wouldn't be any disruption for the next several months, but acknowledged that the production stoppage could be a risk later in the year.

At the very least, new seasons of popular shows will be delayed, and between a lack of new content and the current surge in viewing time, Netflix subscribers could be incentivized to check out competing streaming services. We won't know how this plays out for at least a few months, but it's a clear risk that the market seems to be ignoring.

A perfect time for password sharing

Say you're newly unemployed and you now have a ton of time on your hands. Not only are you out of work but you're stuck home because of the pandemic. You'd love to watch Netflix, but to save a few bucks you just use your friend's account instead of paying for your own.

Password sharing has long been something of a bugaboo for Netflix, a known risk that it's mostly overlooked as subscription numbers soared. But Netflix hasn't really endured a recession as a predominantly streaming company, and the recession that is likely to occur looks to be particularly brutal. During the 2008-09 financial crisis, Netflix was just starting to offer streaming bundled with its then-predominant DVD-by-mail service, which doesn't have the same password-sharing vulnerabilities. While Netflix is part of a coalition of entertainment companies aiming to crack down on large-scale piracy, the company still publicly claims its uninterested in breaking up casual password sharing. 

Asked about password sharing on the earnings call last October, Chief Product Officer Greg Peters said: "Yeah, I think we continue to monitor it. So we're looking at the situation and we'll see, again, those consumer-friendly ways to push on the edges of that, but I think we've got no big plans to announce at this point in time in terms of doing something differently there." "Consumer-friendly" is the key phrase there. Netflix doesn't want to do anything that might hurt its brand or upset its subscribers or even potential ones.

However, an estimated 10% of Netflix viewers are currently using borrowed passwords, costing the company around $135 million a month, and that number could soar in the current economic crisis, especially as 22 million Americans have filed for unemployment in the last four weeks.

Like the Hollywood shutdown problem, we won't immediately know if password sharing takes away customers or cuts into growth for at least a few months, but it's a risk worth keeping an eye on. 

Netflix will likely wow investors with its earnings report as stay-at-home orders in March look to have driven a spike in subscribers, but if the Hollywood shutdown lasts several more months and unemployment numbers continue to grow, the coronavirus crisis could be a much stronger headwind on the streaming company than investors currently expect.