Sony Scraps "The Interview" Release on Hackers' Threat - Analyst Blog

Sony Corporation's (SNE) tribulations seem far from over since the cyber attack on the company's corporate website last month. Before this leading electronic products manufacturer could recover from the after-effects of one of the biggest hacks in corporate history, it encountered yet another obstacle in its path.

Recently, Sony had to reportedly scrap the New York premier and release of the movie “The Interview” that involved the fictional assassination of the dictator of North Korea – Kim Jong Un. Also, the company gave an option to the theater owners to back out from releasing this Hollywood flick on Dec 25.

Consequently, top theater chains of North America – such as AMC Entertainment Holdings, Inc. (AMC), Regal Entertainment Group (RGC) and Cinemark Holdings Inc. (CNK) – postponed the screening of “The Interview” and did not specify any future release date. Left with a little choice, Sony supported the decision of the theater giants, who justified their move as appropriate for the safety of movie goers.  

Why The Move?

The startling blow came after a warning was issued by the group of hackers called "Guardians of Peace", who had earlier taken responsibility for the Sony cyber attack. As per media reports, on Tuesday, “Guardians of Peace” threatened to attack movie theaters that would screen this controversial movie. The hackers have intimidated violence in reference to 9/11 terrorist attacks and urged people to boycott this movie.

As a matter of fact, the hacking pattern of these hackers are believed to bear resemblance to that of the North Korea hackers, as per a previous market report. Notably, in the first week of December, Sony had reportedly contemplated North Korea as its prime suspect for hacking the internal data of its corporate network on Nov 24, 2014 (read more: Is North Korea to Blame for Sony's Cyber Security Breach?).

Our View

The shocking news of the “The Interview” movie release cancellation is disappointing and makes this cyber attack ‘a costliest affair' for Sony. Having already incurred around $10 million in marketing costs, the company also lost revenues from U.S. and foreign box office. The box office analysts had forecasted overall revenues of around $120 million for Sony from this movie. Echoing similar sentiments among investors, the company's shares have tumbled 5.7%, since Nov 24.

Sony currently carries a Zacks Rank #3 (Hold).