Sony cancels North Korea movie in apparent win for Pyongyang hackers

Reuters/December 18, 2014

By Eric Kelsey, Lisa Richwine and Piya Sinha-Roy

Sony Pictures has canceled the release of a comedy on the fictional assassination of North Korea's leader, in what appears to be an unprecedented victory for Pyongyang and its abilities to wage cyber-warfare.

Hackers who said they were incensed by the film attacked Sony Corp (6758.T) last month, leaking documents that drew global headlines and distributing unreleased films on the Internet.

Washington may soon officially announce that the North Korean government was behind the attack, a U.S. government source said.

The $44 million raunchy comedy, "The Interview", had been set to debut on Dec. 25, Christmas Day, on thousands of screens.

"Sony has no further release plans for the film," a Sony spokeswoman said on Wednesday when asked whether the movie would be released later in theaters or as video on demand.

Earlier in the day, Sony canceled next week's theatrical release, citing decisions by several theater chains to hold off showing the film. The hacker group that broke into Sony's computer systems had threatened attacks on theaters that planned to show it.

North Korea has denied it was behind the hacking, but security experts in Washington said it was an open secret Pyongyang was responsible.

"The North Koreans are probably tickled pink," said Jim Lewis, a senior fellow with the Center for Strategic and International Studies. "Nobody has ever done anything this blatant in terms of political manipulation. This is a new high."

Sony came under immediate criticism for the decision to pull the movie.

"With the Sony collapse, America has lost its first cyberwar. This is a very, very dangerous precedent," said former Republican House of Representatives speaker Newt Gingrich in a Twitter post.

However, Sony's shares closed 4.8 percent higher in Tokyo on Thursday, outperforming the 2.3 percent gain on the Nikkei benchmark index, as investors said there was hope the movie’s cancellation would help bring an end to the crisis.

"By not releasing the movie, they won’t be hacked again. Investors think that from here on, further damage probably won’t be done," said Makoto Kikuchi, CEO of Myojo Asset Management. "Whether that justifies a 5 percent jump in Sony’s stock, I’m not so sure."

Macquarie analyst Damian Thong estimated last week, before the cancellation of "The Interview", that losses from the hacking including online leaks of other movies such as “Fury” and “Annie”, would likely be around 10 billion yen ($84.41 million). The worst case scenario, he said, would be an impairment of 25 billion yen.

"Team America"

The film industry showed support for the film in various ways. Hollywood filmmakers and actors, many of them friends of "The Interview" stars Seth Rogen and James Franco, also criticized the decision made by theaters and Sony.

Texas cinema chain Alamo Drafthouse said its Dallas-Fort Worth theater would show the puppet-comedy "Team America: World Police" in which a U.S. paramilitary force try to foil a terrorist plot by late North Korean leader Kim Jong Il.

The White House National Security Council said the United States was investigating the Sony breach and would provide an update about who did it at the appropriate time.

"The U.S. government is working tirelessly to bring the perpetrators of this attack to justice, and we are considering a range of options in weighing a potential response," NSC spokeswoman Bernadette Meehan said, adding that the government was not involved with Sony's decision to pull the film.

The U.S. Federal Bureau of Investigation warned theaters and other businesses associated with "The Interview" on Tuesday that they could be targeted in cyber-attacks, according a copy of the document reviewed by Reuters.

Still, several U.S. national security officials told Reuters the government had no credible evidence of a physical threat to moviegoers.

Sony said it was "deeply saddened at this brazen effort to suppress the distribution of a movie, and in the process do damage to our company."

The studio said it stood by the film makers of "The Interview".

(Additional reporting by Jim Finkle in Boston, Mark Hosenball in Washington, Ritsuko Ando, Thomas Wilson and Reiji Murai in Tokyo; Editing by Chizu Nomiyama, Richard Chang and Raju Gopalakrishnan)

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