December 12, 2014

Not So Sunny at Sony

Not So Sunny at Sony

Michael Lynton is not having a good month. Neither is Amy Pascal. Mr. Lynton, the CEO of Sony Entertainment, and Ms. Pascal, Sony’s co-chairwoman, are reeling from the recent hacking attack against Sony, presumably from a group calling themselves the Guardians of Peace.

The attack is apparently in retaliation for Sony’s failure to pull its upcoming Christmas movie, THE INTERVIEW, starring Seth Rogen and James Franco, from being released. The film, a comedy, is about two reporters (Rogen and Franco) and their attempt to kill North Korean leader Kim Jong-un, who I can only assume doesn’t see the humor. North Korea has demanded that Sony shelve the film. Sony’s intent to stick with its holiday release schedule appears to have triggered the attack, although law enforcement officials including the FBI cannot definitively attribute the hacking to North Korea, or anyone else for the matter. The attack on Sony was carried out from command and control centers across the world, from computers and servers in places such as Singapore, Thailand, Cyprus, Poland, Bolivia and the United States.

It’s hard to quantify the impact all of this will have on Sony, Mr. Lynton, Ms. Pascal and the countless others affected. The size and scope, as well as the nature of the hacking are unprecedented in corporate America. This is just not the same as previous attacks on companies such as Target or JP Morgan Chase, where confidential customer credit and other financial information was obtained for the purpose of identity theft. The Sony attack was designed solely to embarrass a major movie studio and bring it to its knees by releasing scores of confidential business records including executive salaries, employee social security numbers, contracts, films not yet released, accounting records (who said Hollywood movies never make a profit?), scripts, personal email, and the list goes on and on.

The goal appears to be to actually cripple Sony to the point where business cannot be conducted as usual. The online entertainment industry publication, Deadline, speculated on Wednesday about whether people will be nervous about doing business with Sony since their data and private conversations might not be secure. I doubt anyone would turn down a deal with Sony Pictures because of data concerns, but I have no doubt the company’s new security systems will rival Fort Knox.

We have all become so completely reliant on technology to conduct even the most rudimentary tasks in our businesses that when the technology is disabled or unavailable for any reason, we are functionally out of business. Who knows? Maybe the next big trend in corporate communications is going to be the return of the telephone.

Many of us have been the subjects of identity theft, or had viruses infect our home or business computers. And to some degree we’ve been forced to accept that this is the new normal. We have adopted what we hope are measures to insure our privacy and protect our data and finances. But this attack on Sony brings everything to a new level. The fact that hackers can orchestrate such an assault on a major international corporation in order to prevent a product from being brought to market is a game changer. The financial cost to Sony, alone, is estimated by some to be in the $100 million range, and it may take as long as three months for them to get back full use of their systems. How many of our businesses could function for three months without the use of some or all of our technology? It’s a sobering question for those of us who own and or run businesses.

I have special sympathy for Sony’s situation since, as some of you know, in addition to running Marcum I am also in the film production business (I am privileged to be one of the producers of the Jason Bourne films). Moreover, I see in Marcum’s business that more companies are starting to take cybersecurity issues very seriously. The Technology Assurance Services group of Marcum LLP and our subsidiary Marcum Technology both help companies identify and resolve their technology vulnerabilities, and is one of the fastest growing service offerings at our Firm.

They say success is the best revenge. I hope THE INTERVIEW is a mega hit for Sony. It better be, after everything they’ve gone through to get it made and into theaters.