Impact of the Sony Hack

You would be hard pressed to find someone who hasn’t heard about the recent hack of Sony Pictures servers.  Hackers were able to access, copy, and release private emails, photos, film scripts, and other documents.  Many people have focused on the embarrassment caused to the company or the loss of revenue as content is leaked online and other projects halted or suspended.  Ultimately the impact of this hack will be felt for years to come.

Financial Impact

The most obvious financial loss is associated with the release of the movie “The Interview.” Originally slated for wide scale release on Christmas Day, the movie was pulled when theater chains refused to show it under threat of terrorism.  Reports indicate that the film, which cost an estimated $50 million to make, will see some form of release in the coming weeks and months, through a combination of independent theaters, VOD (video on demand) and other distribution.  However, given that the film was illegally released online and the decrease in number of screens, it is unlikely to make as much at the box office as originally hoped.

Now multiply that loss by the number of leaked scripts and other content involved in the hack.  Movies at various stages of production may be suspended or pulled completed. Others may have to be reworked due to concerns about piracy.  It will take months or even years for the true costs associated with film development to be calculated.

Lastly, a number of lawsuits have already been instigated against Sony for failing to protect data, privacy, and creative works of its employees and creative partners.  These will likely take years to go through mediation or courts and involve legal fees as well as payouts.

Consumer Confidence

A lesser discussed issue is the impact this hack may have on consumers of Sony devices such as smartphones and game systems.  Sony has experienced hacks on their gaming network and division in 2011 and 2012.  In 2014 PlayStation users regularly turn over financial and personal data to the company in order to purchase games, extras, movies, and overall enhance their enjoyment of their device.

Take the sheer quantity of data involved in the 2014 hack and ask yourself what it would mean if it had been applied to the PlayStation network? Or if they had hacked Sony smartphones?  With identify theft the fastest rising fear amongst consumers, the threat of another hack may have a significant impact on future purchases. That type of drop in consumer confidence may be much harder to quantify, but it could have a far-reaching effect on Sony profits. It could also cause consumers who are already vigilant about their security to question devices manufactured by other companies besides Sony.

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