Sony Corporation’s stake in Asia makes granting hackers’ demand a possibility
Sony Pictures Entertainment executives have to be at least considering pulling “The Interview” as damage to its bottom line and reputation from the massive cyber attack mounts, security and business analysts told TheWrap.
Messages purporting to be from the hackers claiming responsibility for the assault have demanded that the studio halt plans for the nationwide Christmas Day release of the Seth Rogen-James Franco film comedy about a plot to assassinate North Korean leader Kim Jong-un. And a Sony attorney’s letter to news agencies is the clearest indicator yet that the studio believes stopping the film’s release is the hackers’ motive.
“I’m sure they’re looking at every possible option and pulling the film would have to be one of them,” Adam Levin, chairman and founder of cyber security firm IDT911 said Monday.
The studio wouldn’t comment for this story, and its leadership has given no indication that it is thinking about pulling the film. Monday, CEO Michael Lynton defiantly told employees gathered on the studio lot that “this will not bring us down.”
But Monday’s revelation that Sony Corp. CEO Kazuo Hiray was concerned enough with “The Interview” to intervene in the creative process – toning down a scene in which the Korean leader’s head blows up, among other things – changes the landscape. It underscores the reality that Sony Pictures is just one part of a huge global company that does considerable electronics and manufacturing business in Asia, and is more concerned with its image and overall bottom line than the box-office grosses of a mid-range budget movie comedy.
“Japanese culture demands saving face, and there has to be dissonance within the main Sony group regarding the whole flamboyant, non-Japanese style of the entertainment business, ” said Seth Willenson, a valuation expert specializing in entertainment and media.
“Sony’s business in Asia and all of their manufacturing and electronics mean that there is some financial vulnerability there,” he said.
There are clear reasons for Sony not to pull “The Interview” from theaters. It would be knuckling under to corporate terrorists, there is no guarantee that doing so would end the hacking and data dumps, and several security experts said it would likely embolden other cyber criminals.
“The real issue is that you never know what the reaction is going to be if you do,” said Levin, who also noted that there is a chance that the communications may be coming from groups who aren’t tied to the hackers. He also pointed out that there are factors known only to Sony’s leadership.
“One thing that you can be pretty sure of is that there have been communications and messages from those claiming responsibility to the studio that haven’t been made public, so we really don’t have the complete picture,” he said.
The production budget of “The Interview” is $44 million, and it is tracking to open in the $20 million range, though that could well go higher since publicity around the hacking has heightened its profile. There would be marketing costs lost and penalty payments to partners would likely be required, so it could be at least a $100 million hit.
But even viewed strictly from a bottom line perspective, pulling the movie might be costlier than absorbing the damage for Sony Pictures, if not for Sony Corp.
“This is a company and an industry built on the First Amendment and freedom of speech, not the Acme Tire company,” said an insider. “The message that pulling the film would send to talent and filmmakers would be devastating, and put a huge hit on the studio’s credibility and ability to do business.”
One factor that could change the equation would be threats of violence, or increasing indications that it is a possibility. An email on Dec. 5 purportedly from the hackers to Sony employees threatened “your family will be in danger,” and the FBI is involved in the investigation.
“In this day and age, when you hear phrases like ‘Christmas gift,’ it’s hard not to be a little concerned, because we’ve seen some scary and ugly things,” Levin said.
Theater owners who might be playing the film tightened cyber security after the attacks, but have not expressed concerns regarding potential violence, said Patrick Corcoran, vp and chief communications officer at the National Organization of Theater Owners.
For now, despite some strategic tweaks to the marketing and publicity campaigns, the film’s release remains on track.
“I would release it,” said Willenson, “and then take the benefits and invest in more computer security.”