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 But the devastating hack, he says, might end up being much
less of a disaster for the studio than many had anticipated.
Michael Lynton says the costs associated with the cyberattack,
the most destructive on a private company on U.S. soil, will be
completely covered by insurance and will not mean any more
cost-cutting after a few years of painful restructuring.
"I would say the cost is far less than anything anybody is
imagining and certainly shouldn't be anything that is disruptive
to our budget," Lynton told Reuters in an interview, seven weeks
after the hacking attack that the U.S. government has blamed on
North Korea.
While Lynton would not elaborate on an estimate for the costs
for the entertainment arm of Sony Corp, he said it was "well
within the bounds of insurance."
Some experts have put the cost at up to $100 million, which
could include computer repair or replacement, steps to prevent a
future attack and lost productivity while operations were
disrupted. They expect more companies to suffer similar fates.
The attack targeting the entertainment arm of Sony Corp. wiped
out massive amounts of data and led to the online distribution
of email, sensitive employee data and pirated copies of new
movies.
After the attack surfaced on Nov. 21, employees came to work and
discovered that not only were their computers disabled, but they
had lost all past email, contacts, distribution lists, budgets
and anything else stored on the network. At a studio that prided
itself on going "green" and paperless, one employee said it was
"like the place burned down."
But Lynton said no one in senior management is being held
responsible for the hack because, as he notes, the FBI and
cybersecurity firm Mandiant told him that 90 percent of
Corporate America would have fallen to such an attack.
"As one of the investigators said to me, whoever wrote this
software was very, very angry," Lynton said.
The Federal Bureau of Investigation determined that the North
Korean government was behind the attack, launched by hackers as
the studio prepared to release its bawdy comedy "The Interview,"
depicting the assassination of leader Kim Jong-Un. North Korea
had called the film an "act of war," but denies being behind the
attack.
NETWORK BACK IN 3-6 WEEKS
Lynton, a self-described "homebody" who prefers not to stick his
head above the parapet, has been thrust into the spotlight these
weeks, ever since he felt compelled to respond to President
Barack Obama calling Sony's decision to scrap the wide release
of "The Interview" a "mistake" akin to self-censorship.
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Lynton countered that Sony had no choice after major movie chains
backed out of the Christmas Day release because hackers had made
unspecified threats of violence to theaters and owners. Within a
week, however, it cobbled together an alternative release in
independent theaters, and more importantly on video-on-demand, first
online then on pay TV, that has brought in $36 million.
It is still unclear whether the film will recoup its $44 million
production cost, plus $30-40 million in marketing.
Lynton has held town hall meetings at the Culver City studio and
brought in the FBI to talk to 400-500 employees at a time. Employees
note that he sends memos keeping them informed, but that only he
signs them, not his studio co-chairman Amy Pascal, who has kept a
low profile since embarrassing emails of hers were leaked and
published by media.
Lynton recognizes that the hack comes after a few tough years of
fighting with an activist shareholder and rounds of cost-cutting and
job reductions.
But he believes morale is high, something employees corroborate, and
that the studio will soon be back to normal. Email is scheduled to
be restored next week, while the computer network may take another
three to six weeks, Lynton said.
In the meantime, the studio managed to make payroll, sometimes
cutting checks manually, and did not miss any movie or television
production deadlines, since many productions run fairly
independently of the studio. Pulling together the company's
financial statements is difficult, he said, but will be done in
time.
The biggest challenge now, he said, might be rebuilding trust among
employees and studio partners after leaked emails showed the ugly
side of Hollywood's outsized ambition.
Pascal was particularly hurt by an email in which she joked about
the type of movies Obama might like, mentioning films with
African-American themes or stars. She later apologized.
Lynton is looking forward to worrying about normal responsibilities,
like making movies that can compete, and says the company will not
be cutting back on its provocative content, such as "The Interview,"
or turning risk-averse to avoid political problems.
"You can't allow an event like this to change the way you do
business or how you are creatively minded," he said. "That would be
a terrible tragedy."
(Editing by Ken Wills)
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