Sony HQ waiting out crisis

Japan execs mum on film unit woes

A man walks out from the headquarters of Sony Corp. in Tokyo Thursday, Dec. 18, 2014. Sonys miseries with its television and smartphone businesses were bad enough. Now its American movie division, a trophy asset, is facing tens of millions of dollars in losses from leaks by hackers that attacked the company over a movie that spoofs an assassination of North Korean leader Kim Jong Un. Sony Pictures canceled all release plans for the film at the heart of the hack, "The Interview."
A man walks out from the headquarters of Sony Corp. in Tokyo Thursday, Dec. 18, 2014. Sonys miseries with its television and smartphone businesses were bad enough. Now its American movie division, a trophy asset, is facing tens of millions of dollars in losses from leaks by hackers that attacked the company over a movie that spoofs an assassination of North Korean leader Kim Jong Un. Sony Pictures canceled all release plans for the film at the heart of the hack, "The Interview."

TOKYO -- Sony Corp. leaders maintained their silence Thursday as Sony Pictures Entertainment, a trophy asset, worked to repair damage created by hackers who attacked the company because of a film that dares to portray North Korean leader Kim Jong Un.

The studio's reputation is suffering as revelations spill from tens of thousands of leaked emails, stolen by the hackers, that could damage its relationships with movie stars and give other studios an advantage.

The fallout, financial and otherwise, from the hack is said to be a messy distraction for top executives of the Tokyo-based maker of the PlayStation 4 video game machines, Spider-Man movies and Xperia smartphones.

For now, Sony's damage control strategy in Japan appears to be waiting out the crisis in silence.

The group headquarters in downtown Tokyo's port district is refusing all comment and referring questions about Sony Pictures to the movie division's headquarters in Culver City, Calif.

"A rumor only lasts 75 days," goes an old Japanese saying.

"This is seen mainly as an attack on Hollywood," said Damian Thong, a senior analyst at Macquarie Capital Securities. "I feel they want to clean it up as fast they can and just get on with life. That's what they want."

Since Sony Corp. and Sony Pictures have long been run as entirely separate companies, he said, there might be little spillover from what a U.S. official said was an act of North Korean cyberwarfare. The studio on Wednesday canceled the release of the movie The Interview after the hackers this week made threats of terror attacks against cinemas that showed the film.

As far as Japan is concerned, it's as if the movie doesn't even exist. Sony Pictures never planned a Japanese release for the film.

Sony will lose money from the leaks of some movies and proprietary information, and perhaps also from possible lawsuits by employees whose data were disclosed.

Thong expects the amount to range from $170 million to $210 million. Enough to hurt, but for a company that booked $65.8 billion in sales in the fiscal year that ended in March, not fatal.

Before the hackers struck, Sony was forecasting $8.1 billion in annual sales for its movie division out of total sales of $66 billion.

It's possible that the uproar could lead to the movie making more money than it might have otherwise, said Benjamin Cavender, a senior consumer electronics analyst at China Research Group in Shanghai. Sony Pictures has said it has no further release plans for the film but that does not rule out it being revived later.

"In the short term, it hurts. In the longer term it might be positive in terms of turning the movie into a cult classic," Cavender said.

Lost revenue related to The Interview is hardly the worst of the tribulations for a company that has lost money in six of the seven past years in intense competition from Apple Inc. of the U.S., Samsung Electronics Co. of South Korea and cheaper Chinese rivals.

Despite improved performances by its cameras, TVs and game businesses, write-offs for its mobile-phone division have kept Sony awash in red ink. Before the Sony Pictures crisis blew up, it was expecting a $2.1 billion loss for the year through March 2015.

Often, as one part of Sony's business recovers, another area falters. By the same token, despite fiascos like The Interview, Sony Pictures has had big hits in movies such as Spider-Man, Men in Black and Skyfall.

But some investors in Sony say the problems at Sony Pictures reflect the fundamental weakness of a consumer-gadgets company trying to marry its culture with a Hollywood studio. Sony bought the predecessor of Sony Pictures in 1989.

"I doubt whether Sony, which is a hardware and electronics company, can manage Sony Picture Entertainment. I don't think Sony's management over them is really functioning," said Mitsushige Akino, chief fund manager at Ichiyoshi Asset Management in Tokyo.

Sony's onetime status as an icon that pioneered products such as the Walkman music player is scarcely known to a generation technology lovers and it has never realized the blockbuster connection it hoped to gain by owning both electronics and entertainment businesses.

Sony was one of the first Japanese firms to successfully tackle world markets. Nearly three-quarters of its annual sales are overseas and about 42 percent of its shareholders are foreign.

The silence on the latest crisis is typical of Japanese companies, said Cavender.

"Often there is no statement or even if there is one you have to read between the lines because nobody ever says anything directly," he said. "Coming out with a statement might go a long way toward ending the story."

Information for this article was contributed by Emily Wang and Kaori Hitomi of The Associated Press.

Business on 12/19/2014

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