The Sony Hack Part 1: The Hollywood Dimension

Kevin Stahler (PIIE) and Stephan Haggard (PIIE)
December 22, 2014 10:00 AM

Update (1 PM December 21 by Stephan Haggard): Due to its highly fluid nature, we have periodically updated this story with additional developments and details.

Besieged by disclosures of--and from--a sustained cyber-attack now attributed by the FBI to North Korea, Sony Pictures decided on December 17 to pull the release of The Interview. The cancellation currently includes any plans to launch on DVD or video-on-demand, although Sony continues to insist it seeks distribution of the film.

We are now at two important and interrelated junctures in this fluid story. First, what should Sony – and Hollywood at large – do next? Second is the question of whether and how the US government might respond to this unprecedented act of cyber coercion. Today we will deal with the Hollywood angle; in a follow-up post we will delve into the implications for cyber security, including responses, defense and future deterrence.

The final nail in The Interview's coffin came when the Guardians of Peace, the hacking group involved in the initial attack on Sony's systems, issued threats to physically harm theater-goers. The proverbial crowded theater provides a terrorist—or deranged person--with an obvious soft target, as the 2012 Dark Knight Rising shootings in Aurora Colorado showed. Sony Entertainment CEO Michael Lynton claimed in an interview with Fareed Zakaria that as the theater-owners peeled away "one by one," his hands were tied. Sony ended up issuing the following statement:

"In light of the decision by the majority of our exhibitors not to show the film The Interview, we have decided not to move forward with the planned December 25 theatrical release. We respect and understand our partners' decision and, of course, completely share their paramount interest in the safety of employees and theater-goers."

Many scoffed at the risk aversion of both Sony and the theaters. Yet in a stunning revelation at the Washington Free Beacon, Bill Gertz reports that a DIA report, dated Sept. 13, 2004, revealed that five North Korean units of covert commandos were trained for attacks inside the US. Pyongyang purportedly dispatched these teams to the United States in the 1990s to go after nuclear power plants and major cities in the event of a conflict. Can such asymmetric capabilities be ruled out altogether?

In the interview with Zakaria, Lynton claimed that the same logic operated with respect to release of the film online or through video-on-demand; that since Sony Entertainment did not own such infrastructure for distribution, it relied on e-commerce sites or video-on-demand providers to distribute the film. Lynton claimed that no firm had come forward offering to distribute the film through these channels either.

However there are strong reasons to be skeptical of Sony Entertainment's cover story, or cover-your-ass story. The GOP still holds the sword of substantial amounts of unreleased material over Sony's head, and this could all be a complex bargaining game. First, there are ample signs of Sony nervousness well before the hacking episode, beginning with unusual efforts on the part of Japanese management to micromanage the assassination scene, revealed in excellent New York Times coverage. Even prior to the GOP threat, theater owners had complained about Sony waffling according to some Hollywood news sites, including with respect to how hard they would market the film. The theater security issue requires close scrutiny as well. Does this mean that theater owners--or sporting and concert venues--will shut down events in response to foreign threats? We are also not convinced about the difficulty of online release. In the digital age, a major player like Sony can't get a film online when you can watch pirated versions of virtually anything?

Lynton's statements to the contrary, President Obama was probably right: a firmer, less ambiguous response from Sony would have mattered.

Sony's investors supported the cancellation: its stock closed 4.8 percent higher after the announcement to pull The Interview. The backlash against the apparent surrender, however, was swift and highly predictable. Nearly everyone in Hollywood trotted out some form of a declaration that "the terrorists won" or that the decision set a dangerous precedent emboldening despots the world over. President Obama, in his comments on the issue, followed suit.

It did not take long for the adverse effects of the incident to ripple through the industry. Not only did the attackers succeed in stalling the release of The Interview, but they have already induced at least two other cases of self-censorship beyond the walls of Sony studios:

  • Yahoo Movies reports that New Regency has pulled the plug on a Steve Carell movie entitled Pyongyang. A summary is appended below, but it should be painfully clear that this film is well within the realms of good taste and, worse, may have actually had something important to say about the surreal banalities of life in North Korea (of which The Interview certainly did not).
  • Alamo Draft House Cinema and other theaters initially planned to show 2004's Team America: World Police, which features the impalement-death of Kim Jong Il, in place of The Interview. Not so fast, said Paramount, which declined to let the movie run.

We can easily imagine such intimidation spreading to virtually any commentary on North Korea, from news outlets to NGOs and blogs.

Lynton claims that Sony remains interested in releasing the film. One possibility is that VoD providers or e-commerce firms might relent and see the business potential. In a victory lap, however, the hacking group issued a new statement Friday to "never let the movie released [sic], distributed or leaked in any form." An alternative would be write off the entire $44 million investment and release the movie directly online through a Sony site. This would make a profound statement about the right of free speech in the technological age: "you have used technology to try to censor us, we use it to distribute our message to everyone with an internet connection." Such a decision would, of course, leave Sony vulnerable to further release of materials by the GOP or another round of attack.

We hope that the other studios view the incident both as a wake-up call and a rallying cry.  Blackmail is a function of vulnerability. All the studios – and US business more broadly – must seriously reassess their IT defenses and make the security team a vital component of their organizations, which Sony reportedly did not do.

But by far the most important step is for the industry to demonstrate a collective commitment to defend the principals of free artistic expression. Developments in this regard have been disappointing. The Motion Picture Association of America (MPAA), the major lobbying wing of the film and television industry, issued a statement shortly after the FBI's calling the act "despicable" but providing nothing concrete in the way of next steps. Meanwhile, the lobbying group is getting itself tangled up in a fight with Google over revelations from the very same leaked Sony data that the MPAA was attempting to revive the failed Stop Online Piracy Act (SOPA) of 2011. We have yet to hear anything from the National Association of Theater Owners.

Sony may still find a way to distribute The Interview, and we hope they do. But the case has clearly moved beyond the industry in the wake of President Obama's brief comments in his December 19 press conference on the issue. In addition to coming down on Sony's decision as a mistake, he also escalated by promising to retaliate at a "time and place of our choosing"; in a follow-up post, we will consider in more detail what the government's response might be.

The Publisher's Weekly description of the graphic novel on which the movie Pyongyang was based:

"In 2001, French-Canadian cartoonist Delisle traveled to North Korea on a work visa to supervise the animation of a children's cartoon show for two months. While there, he got a rare chance to observe firsthand one of the last remaining totalitarian Communist societies. He also got crappy ice cream, a barrage of propaganda and a chance to fly paper airplanes out of his 15th-floor hotel window. Combining a gift for anecdote and an ear for absurd dialogue, Delisle's retelling of his adventures makes a gently humorous counterpoint to the daily news stories about the axis of evil, a Lost in Translation for the Communist world. Delisle shifts between accounts of his work as an animator and life as a visitor in a country where all foreigners take up only two floors of a 50-story hotel. Delisle's simple but expressive art works well with his account, humanizing the few North Koreans he gets to know (including "Comrade Guide" and "Comrade Translator"), and facilitating digressions into North Korean history and various bizarre happenings involving brandy and bear cubs."