Sony Hack Attack: How Much Will This ‘Nightmare’ Cost the Studio?

The damage to the company’s reputation will be key in determining the cyber crime’s toll

James Franco, Seth Rogen
Sony Pictures

The ultimate financial toll of the cyber attack that has crippled Sony Pictures Entertainment for the past week won’t be quantifiable for months, but the hit on the company’s reputation is severe and analysts say that will be very costly.

“This is a public relations nightmare,” Seth Willenson, a valuation analyst specializing in media and entertainment properties, told TheWrap.

“Whether it’s fair or not, it sends the signal that Sony leadership is not in control of their operations and, in addition to whatever toll taken on production, that they’re being diverted from finding solutions to what’s going on with the company.”

SPE is in the midst of a major cost-cutting campaign that has included layoffs and executive exits, after intense pressure from activist shareholders following a string of movie bombs in summer 2013.

The direct financial toll will become more clear once normal operations are resumed, but when that will be is still unknown. Sony said Monday that some systems are back up but offered no indication of which units or when the overall operation would be up to full speed.

The clock is ticking. With two movies set for release before the end of the year – the musical “Annie” (Dec. 19) and the Seth RogenJames Franco comedy “The Interview” (Dec. 24) – getting distribution operations up and wired will be critical. If the release process is compromised, it’s a good bet the box office grosses will be, too. The same goes for other units with retail components, like home entertainment.

This isn’t the first time that Sony has been victimized in a major cyber attack. In April of 2011, its PlayStation Network and Qriocity services were hacked and personal details from the accounts of roughly 77 million video game players were stolen. That shutdown lasted 24 days and ultimately cost Sony $170 million.

The current situation doesn’t affect as many consumers directly but its impact on the back end could be more severe, according to Larry Ponemon, chairman of the Ponemon Institute, a research firm specializing in high-end data protection.

“You can’t measure the retail end of the financial toll at this point because there are too many potential issues that could affect it,” said Ponemon. “But we do know that Sony’s relationships with its suppliers and partners as well as shareholders, are going to be affected adversely.”

For now, Sony’s stock has held up. It has been roughly flat since the attack, and closed Monday at $22.08, not far from its 52-week high.

The data breach remained relatively quiet prior to Thanksgiving. But the story has some bizarre elements, including the possibility that North Korea is behind the attack in retribution for “The Interview,” the film comedy which makes light of an assassination attempt on its leader Kim Jong-Un. It was spotlighted in the news and entertainment media on Monday, so more consumers will be following as the saga plays out.

Other Hollywood studios are paying attention, too. Though no rival studio executives would speak on the record or in specifics Monday, insiders told TheWrap that their IT and data security teams are on high alert.

Five Sony movies, including the high-profile “Annie,” have recently appeared on internet hubs offering pirated films for downloads. It’s not clear that’s the work of the hackers, and Willenson downplayed the impact of the film leaks on the bottom line.

“I don’t think it will hurt significantly, and all the talk about it could actually help. If Harvey Weinstein was running Sony, I’d say the pirated movies part were a publicity stunt,” he said.