LOS ANGELES – Sony Pictures Entertainment Chairman and CEO Michael Lynton held a town hall meeting at the company’s Culver City headquarters on Monday, updating staff on the hack attack that has crippled the movie giant.
“Our business has a strong economic foundation,” he declared. “This won’t take us down.”
Since then, Sony has pulled their movie “The interview” from theaters and the FBI has linked the hackers to North Korea. Now some industry experts are warning that Lynton may be wrong, and that Sony may be in big, big trouble.
“All it would take is to keep up this level of pressure on Sony, its employees, executives, business partners and talent for the foreseeable future and then I think you could actually see something as big as Sony Pictures go under,” Jason Glassberg, an ethical hacker hired to break into computer networks who works with Asian businesses and Hollywood studios, told FOX411. “Estimates are pegging (losses) at over $100 million, but that is before the inevitable lawsuits from everyone. Plus the damage to the reputation to the brand is almost incalculable, then there’s also the cost for providing ID theft protection to 50,000 current and former employees, etc. These hackers could target more Sony projects and divisions down the road, making the cost of damage significantly worse.”
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Nick Selby, a Texas police detective and the CEO of StreetCred Software, which provides intelligence software to law enforcement agencies, concurred.
“Remember, this isn’t the first time Sony has been brought to its knees by a hacker group. In 2011, hackers took down Sony’s PlayStation Network for 23 days,” Selby said. “Sony Pictures has royally P.O.’d someone, and if they make it their mission to sink Sony, it’s possible they could do it. A company of their size can withstand this type of hit once, but not three, four, five times in a row.”
According to research and polling conducted by marketing and branding expert Jeetendr Sehdev, the hack has significantly hurt consumer relations. His report indicates 75 percent say they trust the Sony brand less than they did prior to the data breach.
The studio also has to contend with at least two class-action lawsuits, with more likely to come. One suit filed by two ex-employees on Monday makes the claim that the studio was warned by the hackers on Nov. 24 but failed to take action in protecting personal records.
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They are seeking a minimum of five years of identity theft protection, credit restoration and bank monitoring, and money for unspecified damages. A second suit has since been brought by production managers of some of its biggest hits, requesting restitution for the damage brought by the exposure of personal data.
“It’s impossible to prevent all hacking, but the scale and damage that was done with Sony all came from their own negligence and lax security. People are angry at how they have been handling it – slow and unresponsive,” one employee told FOX411. “Sony was under pressure to sell off the entertainment division last year, so they might renew that pressure and sell it off now. I hope they bring in new management – smart management and clean up their slovenly ways.”
With a modest budget of about $40 million, "The Interview" had been predicted to gross around $30 million in its opening weekend. Doug Stone, president of film industry newsletter Box Office Analyst, forecast that Sony could have grossed $120 million in U.S. and foreign box office revenue from the film. It has already spent tens of millions on marketing.
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But Stone said the losses represent a single movie flop, not a spreading corporate disaster. Revenue from Sony Corp.'s "pictures" business totaled 830 billion yen ($7 billion) last fiscal year.
"Disney wrote down $200 million on the "Lone Ranger" and didn't bat an eye," he said of the rival studio. "So while it would be a significant hit, it certainly wouldn't cause a financial collapse."
One silver lining may be the company’s cyber breach insurance. According to CSOOnline, a website covering security and risk management, some of the hacked documents revealed Sony had taken out a $60 million policy in the event of cyber threats. The policy covers security and privacy liability coverage, network interruption, and cyber extortion, which means Sony could make a claim under their policy and recoup at least some of their losses.
Reaction from Sony investors has so far been mixed. After the stock dropped 10 percent during the hacking saga, it rebounded Thursday after “The Interview” was yanked, climbing almost 5 percent on the Nikkei index.
"The full and true impact of this has not been felt yet. We're still in the process of watching this unfold and we don't know what's going to happen in the long-term," Glassberg said. "I'd be surprised if the stock didn't take a hit at some point."
Sony has so far declined to estimate its financial losses, with experts indicating that the full impact will take around six months to determine.
The Associated Press contributed to this report.
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