Cyberattack Won’t Impact Sony’s Bottom Line

Sony Pictures StudiosAccording to Sony, though the cyberattack on them which played out on such a public manor was one of the more vicious attacks in history, the incident itself won’t be affecting the company’s bottom line. To wrap up the incident, Sony is putting aside $15 million (¥1.8 billion) in “investigation and remedial costs.” Due to not releasing The Interview in theaters nationwide and offering fewer releases in general, Sony Pictures projects a 11.7% decrease in revenue. Still, the division estimates an operating profit of $20.4 million (¥2.4 billion) for the quarter. Despite the lack of direct financial loss from the attack, there likely lies costly and unforeseen ramifications from the hacking attack.

Let’s talk after the jump.

Directly, the hacking incident resulted in a much smaller return from The Interview than expected. On top of that, Sony Pictures was down for well over a month, which has its on costs. Mix that with paying for much-needed infrastructure cleanup after the hacking incident and the numbers suddenly look too bad for Sony Pictures. The real loss, however, is one that cannot be measured – at least not yet. The hacking incident played out in a very public manner, with many private conversations spilled for anyone interested. In addition to interesting revelations like Sony and Marvel potentially teaming up for future Spider-Man flicks, many nasty exchanges also made their way into the public eye.

These ranged from top brass at Sony Pictures using less-than-flattering words towards talent to more mid level employees questioning certain contracts and titles. All these can result in a future in which certain talent, be it producers or actors, may not want to work with Sony while others, due to fear of what happened to Sony, might choose to deal with another studio. All of this in many ways will be impossible to measure as we’ll never know the course of Sony Pictures had the hack not happened. However it’s not a stretch to think that due to the distasteful nature of some private emails, that some may decide to do business with other studios, resulting in lost projects for Sony. We’ve already seen one such loss where Sony Pictures couldn’t make up its mind on the Steve Jobs biopic by Aaron Sorkin, a film that’s now being shot at Universal, despite it being Sony who fetched the movie rights immediately upon availability and spent money developing the idea.

 Sales are expected to have decreased 11.7% year-on-year (a 23% decrease on a constant currency (U.S. dollar) basis) to 197.6 billion yen (1,633 million U.S. dollars). The expected significant decrease in sales on a U.S. dollar basis is primarily due to a decrease in sales for Motion Pictures and Television Productions. The expected decrease in Motion Pictures sales is due to significantly lower home entertainment and theatrical revenues. The expected decrease in home entertainment revenues is due to fewer major home entertainment releases in the current quarter as compared to the same quarter of the previous fiscal year while theatrical revenues are expected to have decreased due to the stronger worldwide performance of theatrical releases in the same quarter of the previous fiscal year. The expected decrease in Television Productions sales is due to the same quarter of the previous fiscal year benefitting from higher home entertainment and subscription video on demand (SVOD) revenues for the U.S. television series Breaking Bad.

Operating income is expected to have decreased 21.9 billion yen year-on-year to 2.4 billion yen (20 million U.S. dollars) primarily due to the above-mentioned decrease in Motion Pictures and Television Productions sales. 

  The current quarter is expected to include approximately 15 million U.S. dollars (1.8 billion yen) in investigation and remediation costs relating to the above-mentioned cyberattack.  

Discuss:

Do you think the cyberattack on Sony will continue to have ramifications for Sony Pictures?

[Via Sony]