Photo: All Rights – Sony Media

For years we’ve been told how the Internet is a very dangerous place. The stories keep trickling in, especially the ones about stolen identities, or a big box store being hacked for credit card numbers. The stories have been more frequent, and the thefts more blatant, but in the end it’s just been more of the same. These threats are usually more unsettling than frightening. It’s been a long time since the internet has served up a truly new threat. But now we have something special for the holiday season, a story about Sony Entertainment, a strange movie and international terrorism.

This is a story of blackmail, theft and extortion… and a timely reminder that the biggest threats to a corporation may be its top executives.  The dust still hasn’t settled down yet, but there are already many lessons to learn. Today, we’re going to look at six lessons from Sony’, “The Interview”…

Cyber Crime Is Real: We don’t yet know when this started, but sometime in the past few weeks a group of hackers informed Sony that they had breached their firewall, stolen emails from their top executives and were about to release the most embarrassing emails… unless Sony cancelled the release of their new movie, “The Interview”.

Since this is a comedy about the assassination of Kim Jong-un, the dictator of The Democratic People’s Republic of Korea (DPRK), the smart money is on the DPRK  being the ultimate mover behind the plot. After all, during the summer they threatened the US, and said they would retaliate if the movie was release. Whoever did it, the threats at Sony kept coming, and when they were not acknowledged, the threats went public. First threatening to release stolen emails, and then physically threatening any viewers.

Roles Are… Confusing: in the pre-cyber days, in order to attack an American company, you needed to get on US soil, or you needed to get into a US owned facility overseas. On the Internet, physical borders go away. Anyone can be attacked by anyone, regardless  of geography. Some nameless offshore entity could have attacked Sony. It could be the DPRK, or some proxy in another country. Their target could be the US, which they consider an enemy. Or they could have targeted Japan, which they have had a very bad history with due to their kidnapping of Japanese citizens throughout the 70’s and 80’s. The US could retaliate (and probably will), but so too could the Cyber Force, Japan’s cyber-attack quick response group (is it just me, or could Cyber Force be the name for a new Anime?)

Then again, Sony could hire its own hackers, or an independent hacker group could intervene… whether Sony wants their help  or not. Those in the know fear the damage that caused by two big government groups could cause if they slug it out on the Internet. What about the potential damage if private hacker groups choose sides and start a small war?

In 2013 a similar “small war” broke out between hackers who were for and against Spamhaus, a Dutch ISP that either A) fanatically defended the right to free speech on the Internet or B) provided a refuge for hate speech, neo Nazi’s and kiddie porn (depending on your point of view). When the object of a small war is better publicized, you can expect MANY more participants and probably more than just two sides.

Email Still Matters: The Sony story began with an electronic break-in, and stolen emails from the studio executives. Didn’t the Sony exec’s hear that you just don’t put certain things in email? Don’t write about how bad your clients are, don’t joke about the stupid things they do, and don’t send around notes to your friends on how much you hate your clients.

The perpetrators thought that the threat of exposing the most insensitive and egotistical emails from Sony’s executives would be enough to kill the release of “The Interview”. The strategy made sense. Look at the most boneheaded emails from Wall  Street. These emails insulted clients, pointed to potentially criminal activity and managed to alienate the American public. Sony… not so much. I’ve seen a few poorly written emails, and some badly turned phrases, but not the biggest mistakes I’ve ever seen. Even the email from Son’s Co-Chair, Amy Pascal, are surprisingly mild. So far.

We’ll see if there is more to come. The next executive email that’s splattered across the Wall Street Journal’s front page might come from Sony, or from some other corporation. Just be sure that it doesn’t come from YOUR corporation. See that your training department reminds everyone, especially your executives, that email is still the most frequent “smoking gun” on the Internet.

Demands Never End: The first demand was simple, don’t show the movie. After a few theater chains pulled out of the release, Sony gave in and cancelled “The Interview”.  Instead of an end to the threats, they got new demands. Sony was told, “That doesn’t just mean theatrical release, it means DVD’s, cable, streaming media, related products… anything! Independent theaters wanted to show the movie, and Sony was in a very embarrassing position, so the release was back on for Christmas day.

If Sony hadn’t rescheduled the release, what would the next demand have been? Would Sony be able to distinguish between the “real” terrorists” and the copy cats and pranksters that would inevitably follow? Would all screenplays need to be released onto the Internet for “pre-approval” before they could be released?

Don’t Threaten the Internet: Ironically, the history of this attack reads like a bad Hollywood script. The powerful Western (or is it Japanese?) Corporation is brought to its knees by an anonymous group of techno-geeks. But the geeks, might not be just some anonymous characters. Instead, they may be the secret agents of the last great dictatorships on earth. The attackers (at least briefly) won an extraordinary victory, over one of the most sophisticated corporations in the world. But then they decided to go a bit further.

They not only threatened Sony, they threatened everyone who wanted to see “The Interview”, or download it off of the Internet. And thus the plot turns once again, and the overconfident villain… in the last chapter, loses. Sony did stand up to the hackers until a few major theater chains opted out of the release. But “The Interview” was rescheduled for a Christmas release, using a coalition of independent theaters and streaming services like YouTube, Netflix and Amazon. In the end, the backlash from the Internet may make the Interview a bigger success than it would have been without the hackers.  The Sony incident also accelerated the next big thing in Hollywood…

Day & Date Streaming: The greatest impact of the hacking at Sony may result from the actions of the big theater chains. By caving into terrorism, they brought about the one thing the chains were all against… day and date streaming. Movie ticket sales have been in decline for over 20 years. The high cost of tickets, plus the quality (and comfort) of home theaters has diminished the theater experience. A big release movie… 3D, Imax movie, with popcorn, soda and snacks (not to mention gas and parking) … can cost a family of 4 plus $100 to $200.

Watching a streaming movie at home provides a big screen, great sound system, and comfortable seating for just a few dollars. Theaters are fighting back with better seating and better food, but that means higher prices. The only thing that theaters have that you don’t have at home is the a monopoly on first day releases. Studios want to release to theaters and streaming services at the same time (the strategy for scheduling movie releases through different channels is called “day and date”), but the big chains unanimously resisted simultaneous releases, knowing that it will diminish ticket sales. But Studios need more simultaneous releases to limit piracy between the release in the theaters and on-line. Once the theater chains pulled out, Sony had an irresistible opportunity to stream “The Interview” on the release date. By the end of 2015 we can expect to see many more simultaneous releases.

This story is far from over. In the final days of 2014, we saw what appears to have been a cyber-attack on North Korea, as well as attacks on the Sony on-line gaming platform. Both of these attacks may have nothing to do with “The Interview”, but you can bet that the next attack, or the one after that, may be the next small war on the Internet. At least, that’s my Niccolls worth for the New Year!