Arraya Insights | February 11, 2015
The fallout from last year’s Sony Pictures hack is starting to take shape and so far the cost hasn’t been all that bad. Well, at least financially-speaking, anyway. Sony revealed it has budgeted a mere $15 million to cover “investigation and remediation costs” stemming from the breach.
First things first, we should probably point out “all that bad” is relative. For some organizations, an unexpected expense of $15 million would be more than enough to force them to shut off the lights and lock the doors for good. However, when you’re a division of Sony, spending $15 million to mop up after hackers can safely be described as not being “that bad.” To further put that into perspective, initial estimates had Sony spending somewhere in the neighborhood of $100 million to cover the costs of dealing with the hack. If you’ve prepared yourself to spend $100 million and only end up spending $15 million, it softens the blow a little.
Just because the financial costs didn’t reach worst case scenario levels, that doesn’t mean we should take the situation lightly. After all, the true fallout of the hack can’t be strictly measured in dollars and cents.
One key issue to consider is the shakeup of Sony’s executive team. Sony Pictures co-chair Amy Pascal announced she would be stepping down from her position in order to pursue a career as a producer on Sony’s films. This likely had some connection to the fact that Pascal had become a polarizing figure after private emails swiped from her work account revealed controversial remarks she’d made about President Obama and his taste in movies.
Pascal had been a mainstay on Sony’s leadership team almost continuously since 1988, minus a brief sojourn to serve as the production president of Turner Pictures. Following the scandal, according to The New York Times, Pascal wasn’t pushed out, but she wasn’t exactly begged to stay either.
But Pascal wasn’t the only executive whose private emails suddenly became a hot topic on the gossip pages. As the round-the-clock coverage of the scandal played out, dings to its overall corporate reputation and an erosion of consumer confidence in Sony seemed almost inevitable.
Eventually the hackers demanded Sony cancel the release of “The Interview,” a comedy about an assassination attempt on North Korean leader Kim Jong-un, fueling speculation that North Korea had a hand in what was taking place. Considering the hits Sony had already taken, it pulled the film. All that did was ignite a whole new set of criticisms and protests. Only this time they were coming from people who weren’t happy to see Sony give in to the hackers.
Once again, even though the monetary costs may be lighter than expected, they don’t tell the full story. All of that negative press has a way of adding up and that’s not even taking into account the sudden leadership changes.
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