Highlights

Sony Motion Picture 2Q-FY14 earnings growth was a relief for Japanese multinational
Guardian of Peace malicious attack can impact companys all network related businesses
particularly PlayStation and gaming segment.
Sony Corp still lacking any robust risk mitigation strategy to counter and stop cyber-attacks

Another malicious attack on exposing Sony Corp integrity and brand loyalty
The Japanese multinational, Sony Corporation (SNE), is well-known for its innovation-driven and
consumer-centric approach when it comes to product development. Sony Motion Pictures 2Q-FY14
earnings growth provided a ray of hope to the investors that the companys financial position could be
revived. The reported operating income experienced year-over-year growth of 2.47% while the
operating margin improved by 8.99%. The company upholds the potential to register a further
improvement in its financial returns as the upcoming films by Motion pictures promise good business at
the box office. Fury has earned $180 million up till now since its release.

Source: Company earnings report

Sony Motion Pictures can lose their critical asset: human capital
Sony Corp faces one more cyber-attack on the companys infrastructure that ended up crippling its dayto-day operations along with placing stakeholders information privacy at risk. The companys
employees were notified about the possible breach of their respective personal and professional
information. In the last few days, the companys management has been receiving threatening emails
from hackers bullying them over signing a statement regarding Sonys unethical conduct of business.
Sony Corp should be on their toes to halt the critical data sharing and security of workers as there seems
to be no end to the hackers intimidation. Otherwise, employees can lose confidence in their respective
jobs and shift to other companies that may threaten the companys operations and core competencies
such as innovation and quality.
Sonys success voyage caught in trouble as content privacy breached
The realization of the companys anticipated double-digit growth in Sony Motion Pictures revenues over
the next three years owing to the efficient operations and successful entertainment projects is now

becoming questionable. It appears to be a critical setback to the ambitious management striving to

reflect high growth prospects in its entertainment business segment. Sony entertainments Chief
executive recently revealed that the company had planned to cut operational cost by $300 million in the
current fiscal year which may not realize following this incident.
Revised earnings estimates and growth prospects dragged down by hackers
On 25th November, Sony reported two consecutive days of online system shutdown following the
announcement of the news of cyber-attack by the media. A skeleton image along with Hacked by GOP
message displayed on the screens of each computer and threatened the company regarding further
similar attacks coming its way. The managements flimsy excuses over email responses to stakeholders
further substantiated media reports of corporate cyber-attack.
The attack haunted Sony Motion Pictures as five films including Box office hit Fury was made available
for free on sharing sites, resulting in loss of revenue to the company. According to Torrent freak, Fury
has been downloaded over half a million times since the attack. In 2012, average ticket price for a movie
theater was $7.96, and I have assumed $2.00-$3.00 margin per ticket for film studios. This results in
financial loss of $1-3 million if single movie shared online for free.

Source: mppa.org, Bloomberg.com

Sony Motion Pictures upcoming movie Interviews budget, film cast compensations and benefits,
executives compensation, yet to be aired video content and social security information was made
public.
Financial implications on Sony Corp in advent of breach in critical data security
In present-day business dynamics, minor cyber-attacks can fracture content developers and providers
business in the long run. This incident builds a strong case against Sony Corps strategy regarding cybersecurity whose primary revenue generation segment, Gaming network, was previously hacked three
years ago. Sony PlayStation network hack negatively impacted over 25 million online gamers and costed
the company around $170 million in damages and system restoration. Nevertheless, Sony Motion
Pictures hack is more than social security, passwords, and personal information breach. It can cost the
company hundreds of millions in the subsequent quarters which are greater than the loss in box office
revenues.
Sony Corp is yet to estimate the legal fees pertaining to personal information breach of all stakeholders.
Further adding to the dismay of the company, PlayStation network remained offline for two hours later
this Monday. This delay in service occurred at a time deemed very critical for the enterprise.
Final takeaway

The whole incident has been a nightmare for Sony Motion Pictures, which is yet to end. Lackluster sales
in other segments and restructuring costs can squeeze margins to a minimum level further delaying the
revival of the company strong financial position.
Cyber-attack can have a severe impact on the companys sales in the long-run and can have an
unfavorable impact on the brand loyalty in the gaming segment on which Sony Corp banks its
resurgence. No concrete efforts are taken to prevent the future occurrence of hacking incidents and the
companys inability to counter such malicious attacks via prompt actions highlights the gray areas in the
companys risk mitigation strategy. In reference to the present scenario, investors should sell their
stakes in Sony Corp as the stock price can further decline in the immediate future.