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Sony deal with aftermath of network breach – $1 billion costs

Sony are struggling to regain the trust of consumers, after their online networks were breached by unknown hackers. With their networks being down for so long, the money they are losing is substantial.

Analysts reckon that the breach and subsequent downtime will cost Sony in excess of $1 billion, but the deeper damage to the brand name may be a more long term penalty they have to pay. Sony make a lot of money from online purchasing and the hack has taken out their network for many weeks, costing them hundreds of millions of dollars.

They say that millions of credit card numbers may have been compromised and they have delayed the restart of the PlayStation Network and Qriocity music streaming services after shutting them down to verify their network security.

The timing was bad for Sony, as the earthquake and tsunami disaster in Japan has also cost them money, and they face more expenditure as they pay experts to analyse and enhance network security. With the latest focus on Cloud technology, consumers need to be shown that networks are secure, and the hack has proven that Sony were caught napping, especially as information released indicates that parts of their network data infrastructure weren’t even encrypted.

Jay Defibaugh at MF Global in Tokyo told us “The network strategy is very important to Sony, and is representative of their efforts to move away from one-off sales of hardware and toward monetising a vast content library and adding a competitive edge to their hardware.”

“Anything that undermines consumer confidence in providing credit card information to Sony is a negative for the network strategy. The key point is whether Sony will be able to get consumers to move on after this incident.”

Sony are facing a backlash from consumers after delaying information on the details of the hack for a week. CEO Howard Stringer even made a blog post attempting to pacify the masses. He said “I know some believe we should have notified our customers earlier than we did. It?s a fair question, I wish we could have gotten the answers we needed sooner, but forensic analysis is a complex, time-consuming process.”

Sony CEO: Howard Stringer - having a tough year so far

Billboards and internet blogs are filled with negative commentary about Sony, not only how they let the breach happen in the first place, but the way they dealt with customers after it.

Defibaugh added “I have seen estimates of anywhere from $1 per customer to $10, $100 million is marginally material for Sony, whereas 80 billion yen ($1 billion) is clearly material for a company that generated operating profit of between 200 billion and 250 billion yen last quarter.”

Sony are attempting to appease customers by offering free enrollment for 12 months in an identity protection program, including a $1 million insurance policy for every user if they become victims of identity theft.

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