Sony Hack: Worst Christmas Gift Ever? - Brian Wieser, Pivotal Research
The recent hack of Sony's IT systems has been one of the most important news items related to the media industry – and industries of all kinds – for many years. The implications of this event for Sony alone are significant of course, ranging from the effect on the box office outcomes for several films to the future relationships its executives have with employees and other industry partners. Unfortunately for them, the damage from the attack will continue to play out in slow motion for the company and for the employees whose personal information was divulged. However, for as bad as this news is, there are even bigger issues to consider which relate to the forced transparency of the inner-workings of individual companies.
The absence of a meaningful governmental response so far from either the United States or Japan will likely make this issue more serious than it already was. While the decision to cancel the release of the film The Interview may be understandable from the perspective of Sony, theater owners or other entities without their own standing armies or police forces, it is highly undesirable at a societal level and may prove to encourage future attacks from state or non-state actors alike with commercial or political goals. However, even if an appropriate response is eventually provided in this instance, it seems inevitable that even when individual companies are heavily locked-down in terms of IT security, undesirable leaks of information will still occur. Undoubtedly none of Snapchat, the New York Times or NYU might have imagined that details related to some of their inner workings might have been put on public display because of tangential or indirect interactions with Sony, and yet here we are.
If we recognize that future attacks and leaks on this scale are likely if not inevitable, we consider here a few key implications that follow from the presence of heightened risks associated with forced transparency:
Comparable recent events, such as hacks of credit card data from retailers or last year's Edward Snowden / NSA leak, have had practical impacts for many companies. Those with consumer data are presumably spending more on protecting data, for example, and data is now more likely to be stored outside of the United States when it relates to activity outside of the country. But these issues are relatively self-contained when compared with the Sony incident, which seems much more serious at a commercial level, as so much of what has been released is damaging to the company, perhaps irreparably. If not sufficiently deterred, future hacks could eventually impact companies and the industries in which they operate in an even more significant manner. Unfortunately, even as companies attempt to protect themselves, changes in behavior will inevitably have a real effect – mostly negative – going forward. While information security should always have been taken seriously by companies and individuals of all kinds, perhaps the relative freedom that most experienced with the security of their information over the past two decades was never likely to last. The hackers who released Sony's emails promised a "Christmas Gift" to the press in describing the scale of what has (and still may) come out. But as gifts go, this incident is more like a tin of irradiated fruitcake.
REPORT INCLUDING DISCLOSURES CAN BE FOUND HERE: Madison and Wall 12-19-14.pdf
Brian Wieser is a Senior Analyst at Pivotal Research Group, where he covers securities which areimpacted by the advertising economy, including Facebook, Google, Yahoo, Interpublic, Omnicom, WPP, Publicis, Nielsen, CBS, Viacom and Discovery Communications. Brian can be reached at email@example.com.
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