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Case Study: Business Strategy of Sony Corporation

Founded on May 7, 1946 in Tokyo, Japan, one of the most successful technological corporations in the world: Sony was created under the two legendary men: the physicist Masaru Ibuka and the physicist Akio Morita (Sony, 2013). They made the decision to set up a company repairing and producing electrical equipment and established Sony under the name under the name Tokyo Tsushin Kogyo K.K. which is Tokyo Telecommunications Engineering Corporation, known as Totsuko. At that time, Totsuko was just a small company with capital of 190,000¥ (~ 2000 $) and around 20 employees compare to giant corporations in Japan such as Toshiba, Hitachi, Sharp, Matsushita with tremendous capital, facilities and labour capacity. Although in 1946 Japan was just recovered from the wartime, while the other giants still possessed enough resource and experience to control the Japan market, Totsuko had no machinery and little scientific equipment and using only their own intelligent and engineering expertise, the young talented group with great ambitious set their first step to the new markets. From 1955, the company continued producing product with the logo ‘SONY’. In 1957, the company decided to change the name of the company from Totsuko to Sony Corporation.

There was a little story behind the name ‘Sony’. it was originally by integrating “SONUS” the original Latin for “SONIC” meaning sound, with “SONNY” meaning a youthful boy. The idea came to Akio Morita when he was visiting the U.S in 1950s, he noticed that many U.S companies’ names are relatively simple with only alphabetic letters, at that moment he realized the name Totsuko was difficult to remember for customer around the world and decided to change to ‘Sony’.

Over a half century, Sony Corporation has always been a pioneer in technological development and acquired reputation for being innovative. Its aim is always to be the Japan’s first or even the world’s first. This is also the reason Sony had many failures in the past due to the fact of being first but it never stop moving forward. Grow from a small company of 20 employees, today, it has become a global corporation consists over 160,000 employees over the world and ranked #38 in the World’s Most Powerful Brands list according to Forbes (2012). Sony takes part in a wide range of businesses including electronics, game, entertainment and financial services sectors with major products such as television, computer, camera, game console, mobile audio, mobile phone and entertainment sectors with Sony Pictures Entertainment, Sony Music Entertainment making it one of the most comprehensive entertainment companies in the world. Famous for being always innovative, Sony may not be the biggest company but definitely, the most innovative, they have brought to humanity a vast number of creations that change the world that we already familiar with such as Walkman, Playstation, Blu-ray. Despite the fact that in recently years, Sony has lost their market’s stand due to economic losses and fierce competitions from Apple and Samsung, however, people still believe in the spirit of an innovative legend such as Sony will never fall down.

Unique Selling Points

One of the major unique selling points of Sony is its innovativeness. In the past where the company is not even a competitor to those giants such as Toshiba, Hitachi or Matsushita, the one strength Sony possessed is intelligence and gradually they proved to the world that they deserve a top position in world most innovative brands. The innovativeness of Sony comes from the strategy of creating their own in-house technology for their product development rather than adopting and relying on market technology. Long before the IPod from Apple becomes the world iconic music device, there was the Walkman from Sony. Introduced on 1st, July, 1971, the first Walkman with metal-cased blue-and-silver TPS-L2 was born as the world first’s low cost portable stereo and achieved great success until now with the sale record of 200 million unit by the time the IPod was introduced.

Product quality and quality management are also major unique selling points making the formidable reputation of Sony. From the original electronics products lines, entertainment and communication devices to robots, Sony always presents to the market premium products with the brand exclusive features in order to deliver to the customer their best cutting edge technology. Furthermore, the brand is also famous for its management system in term of quality enhancement and customer services in an effort to further achieve customer’s satisfaction, trust and reliability.

One more thing that makes Sony a well-known brand in the world as well as a major unique selling point is its strong brand equity . By extending the businesses of the company to a variety sectors including PCs and network products, TVs and Digital imaging, Electronic components and semiconductors, Entertainment and Financial services, Sony has achieved huge brand awareness , and it is likewise enhance its brand equity. Some feature products from Sony such as Bravia TVs, DSLRs Cameras, Playstation gaming consoles, portable music players Walkman and VAIO computers for example. In addition, they even take part in entertainment sector with the Sony Music Entertainment and Sony Pictures Entertainment which are very popular in the world.

Major Problems and Challenges Faced by Sony Corporation

Sony is a multinational organization and has to deal with the dynamic industry in which it is operating. It has developed itself by formulating a steady work environment where engineers had thoughtful appreciation of technology and have worked without restraint as they pleased to focus on development of dynamic technologies and creation of products that people have always desired.

Sony Corporation, which has been a leading corporation once, has reported losses for almost four consecutive years. It declared a record annual net loss of 520 billion yen ($6.4 billion) for the year ends in March 2012. The main strategic problem of Sony Corporation is embedded in its several product lines that provide too many parts of the entertainment value chain. The company’s innovation and operations slowed down due to the introduction of the “empire-building” strategy. It has lead to the weakening of its competitiveness in all of the market segments of its business. In addition to the internal problems faced by the wide product lines by Sony, it is facing other external challenges as well. In late 2000s, global economic crisis caused a significant decline in consumer spending as of recession and resultantly caused a decrease in the profitability of Sony. The overall demand of the products of Sony has declined due to the appreciation of the Japanese Yen as it has lead to negatively affect the purchasing power of non-Japanese consumers of Sony Products. Further, the Great East Japan Earthquake disaster and its consequences also effected Sony’s operations badly and resulted in extensive re-establishment costs. In the presence of these external and uncontrollable challenges, Sony was unable to cope with the increasing competition and it became difficult for Sony to retain its market share within the electronics and game industry. In accordance with such problems the top management team of Sony was comparatively conservative. As a result, Sony lost its competitive edge in the industry due to decrease in its technological innovation. In a nutshell, the primary emphasis of Sony Corporation on restructuring strategies in such alarming and challenging situation leads to enormous and continual losses.

Overview of Sony Corporation Strategies and its Implications

Sony Corporation is a giant in its industry having well-built core competencies . It has economies of scale and wide scope both in production and research and development because of its huge network in Japan, the United States and other countries all around the world. Moreover, its unique quality, technology and differentiated products are other top strategic benefits that can help it to attain competitive advantage in market.

Sony’s business operations have been restructured many times in last two decades. Sony’s first signs of loss began in early 1990s when it experienced a loss of ¥ 293.36b in 1995. The reason behind this loss was primarily the unrelated diversification and the dearth of innovation. New products are imitated very soon by the competitors in the digital era because these products can be produced by assembling widely-available parts. So there always remain the dangers of being entangled in price wars. This can only be avoided by readily adapting changes in a way that competitors cannot keep up. In reaction to this, Sony put all its efforts into restructuring the corporation considering it as a way towards success as there was general trend of diversification in leading companies. It faced heavy restructuring costs in this course but these efforts failed to attain the expected results and outcomes. In 1994, Sony formulated an eight company structure with an aim to create a market-responsive company but the losses prevailed. In 1996, it designed a ten-company structure with a same goal to get the company back to profits. Again, due to unrelated diversifications, heavy decentralization and minimal involvement of board room in major decisions, the losses cannot be reduced. After 1999, the company focused on Internet based products due to dot com burst. This major shift in business focus further worsened the situation. The major reasons for further losses were the lack of consolidation and hence substantial fall in sales. In addition to this, the economic slowdown in the US was also a key reason. Consequently, the focus on core competency was re-established which resulted in regaining profits slightly.

Sony must focus on increasing sales immediately so as to meet their short-term goals and attain success in long run. In addition to restructurings among Sony’s product lines, it should ensure stable profitable trend to avoid more severe decline. In the past few years, it has been able to reduce it cost. It should maintain this reduction so as to increase gross margin in the long run. Moreover, it should utilize the increased leverage and other assets in the ways that can lead to optimum and efficient boosting of sales. Most importantly, it should try to reduce or mitigate the macroeconomic risk which has been a major cause of unexpected losses in previous years.

Critical Evaluation of the ‘One Sony’ Strategy

The most important challenges for Sony are the high competition in industry and the macroeconomic risks. In this regard Sony should re-develop its competitive advantage, regain focus, ensure quality and reduce external factors effect on company’s performance and profitability.

The chief executive of Sony Corporation has emphasized on the fact that it’s the time for Sony to change now. He has given a revival plan that elucidates a major shift from the company’s unprofitable television business. It also planned to cut 10,000 jobs as well. In the new strategy, it is emphasized that the Sony would concentrate on three businesses namely the mobile devices, including smartphones and tablets; cameras and camcorders; and games.

Sony has fruitfully expanded into various business segments (Electronics, Game, Pictures, Music, and Financial Services) since the beginning of the company as a telecommunication company in 1946. It has diversified its product lines and has attained remarkable reorganization in a wide range of sectors. It has enhanced many other resources like research and development, marketing, customer services and even unrelated areas. All this has lead to both positive and negative effects simultaneously. As diversification has lead to the expansion of the company, it has also resulted in decreasing its specialized capabilities. Hence, Sony was unable to keep hold of its competitive advantage in any sector or segment of its business and lost the competitive edge against the highly specialized competitors within each segment.

So it’s the need of the hour that Sony locates a specific segment or sector to focus and specialize in it and then it should restructure the company around that focused segment. This type of restructuring can help the company to utilize maximum of its resources in the most productive and optimal way. The current move of Sony’s strategy is exactly in this line. Sony is about to terminate or integrate its least profitable segments. Such restructuring will lead to the development of a proprietary product collection and special set of Sony hardware and software products that can be used against the highly specialized competitors like the products of Apple. In this way, Sony can have an edge over the competitors in long run as no other company is operating in such wide range of sectors currently as Sony is. Sony, no doubt, will have an incomparable experience in this regard. This type of restructuring can reverse the recent unprofitable trend of the company as it will be a strong positive signal to the market and its competitors enhancing the confidence of consumers and investors.

The segments or sectors of business that should be focused should have the specific features. Sony should focus on such sectors which are already its main segments, namely the consumer, professional & devices segment or the networked products & services segment. Moreover, such segments should also have the prospect or potential to get integrated with various remaining segments. In this way, Sony will be able to leverage most of its current resources. Most importantly, this market segment should be moderate in competition as well. Sony would be able to implement the strategies in such segments where it has bigger market share recently.

Keeping these benefits in view, the mobile devices of Sony are extremely desirable sector to be focused by it. The series of Sony Ericsson smartphones launched with the Xperia brand in 2011 which operated on Android gained an extensive market share and have much more potential. Similarly, the Xperia smartphones can also be integrated with Sony tablets, personal computers and game consoles in this concern. In this way, Sony can be able to lower the cost and increase the demand for such Sony products in the long run keeping the main focus on the abundant competition in the smartphones and tablets markets.

Another sector to be focused by Sony can be of the games. The main reason behind it is that it’s the major segments for Sony in which it has competitive market share. The sector of games can induce synergies among Sony’s product lines. Moreover, the competition in the segment of games business is not as extreme as it is in the other market segments. Sony intends to replace the operations of disjointed lineup of content delivery platforms to expand its PlayStation game network which will offer music and video as well. This is no doubt a good strategic step.

However, one Sony strategy is intending to focus on Sony’s digital imaging business that involves digital cameras and camcorders. This policy is again not very appropriate as Sony will have to face intense competition from Canon, Nikon, and Olympus. Moreover, Sony will also face threats from substitutes such as tablet computers which are highly equipped with advanced digital imaging functions. Keeping all these factors in view, it can be deduced that Sony will encounter great problems in the integration of digital imaging sectors with its other businesses.

Another appropriate feature of the new strategy is the decision of shrinking the TV business as the severe competition from Samsung and LG, the deficiency of synergy potentials and the comparatively low share of market is making it impossible for Sony to attain or retain its competitive advantage.

The focus on certain sectors will provide various benefits to Sony. Sony can start acquisitions within related segments once it has established strong focus. The acquisition strategy will lead to increase market share, to get the economies of scale, decrease manufacturing costs, and provide access to new technologies and patents. An increase in the market share will provide Sony with higher pricing power. The economies of scale will raise its productivity. The reduction in the manufacturing cost will lead to give benefit in a price competition. The technologies and patents will allow Sony to speed up their innovation progress which is slow right now. Sony must start by acquiring smaller companies in its focused market segment and should overpay premiums for the expected synergies as well.

Another main focus of this new strategy is to improve the quality of its products by managing such features at the top level of management in integrated way. The major strength of Sony is its brand name because consumers deem Sony’s products as trustworthy and having high quality generally. Whereas the quality of products of Sony has decreased in last few years. For instance, Sony declared that almost around 535,000 of their VAIO laptops might be in danger of overheating because of the temperature gauge error in 2010. Similarly, Sony had also recalled eight models of Sony digital cameras because of the problems with the image pick-up shortly after its multiple delays in launching PlayStation3. Such quality problems have lead to cost lawsuit expenses and have damaged the corporate image as well. Now, Sony is seriously emphasizing on attaining specialization in its products to avoid any such circumstances in future which is a positive action of this strategy.

Moreover, Sony is expecting to enhance its business in emerging markets with greater focus on the innovation . It is a vital strategy for any business so as to keep itself in the market successfully. This will provide it with more markets’ availability in the long run increasing the sales and hence profits.

However, this strategy is lacking in one very important aspect which is handling the macroeconomic factors. The presence of Sony in the international market has lead to its sensitivity to exchange rates and local economies. No doubt, Sony cannot get direct control over such factors but it can utilize its Financial Services segment to mitigate the risk exposure. Sony can apply this strategy by making derivatives contracts (currency swaps and interest rate swaps) or by taking short positions in particular securities as long as these practices comply with laws and regulation. The most problematic task is goal congruence. It means alignment of the manager’s incentives with the overall firm because such hedging measures can impact the profitability of the financial services segment. If these factors are ignored, they will again lead to unexpected losses to Sony in the long run making all other measures unrewarding.

Sony took the direct action in introducing the company system in the first place. It then performed an organizational improvement synchronized with the changes in the surrounding environment. Its strategy shifted in accordance with Chandler’s proposition that “organization follows strategy”. Sony’s organizational reforms and responding to environmental changes after the bubble collapse were significant. The one Sony and one management system will lead to solve many problems and have the capability of improving the performance of the company as all the major decisions are now to be taken and implemented by the top management. The new approach emphasizes on the strengths of the entire Sony Group as “One Sony” by implementing a rapid decision-making process. With the help of this, Sony’s primary goal is to revive and cultivate the electronics business to create new value in addition to further escalation of the stable business foundations of the Entertainment and Financial Service businesses.

This management structure has reduced the previous complexity of the system and efficiency is expected to be increased. The more top-down leadership is expected to start to attain Sony’s goals for the next years as it is said it’s the key to spot the requirement to ‘create visions’, ‘motivate’, ‘establish direction’ and ‘align people’. The focus is on development of six components for successful strategic leadership that involves determining a firm’s vision, retaining core competencies and mounting human capital . All these aspects are introduced to develop new technology and benefit from a centralized decision making system in the long run.

Sony has faced many difficulties for several years and has now been able to properly identify many of its real problems. The latest strategy will lead to address them to some extent. Although some improvements have been shown in the recent times but still many areas are to be focused on in this strategic change. The basic reason behind it is that Sony is not a market leader now. Resultantly it does not have that old power to influence the direction of the market and follow its own plan. Moreover, the policy of defending its own interests has proved to be exigent. The strategies need not be deliberate always, they can emerge as well. This strategy is good in many aspects and can lead to revive Sony Corporation but still Sony needs to work hard if it wants to survive and regain its market-leading position again.

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By: Stefan Thomke, Atsushi Osanai, Akiko Kanno

Sony used to be synonymous with "innovation" and "cool products". The case reveals how the company lost its edge and describes the leadership initiatives to restore its former glory. In 2012, Kazuo…

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• Publication Date: Jun 5, 2018
• Discipline: General Management
• Product #: 618045-PDF-ENG

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Sony used to be synonymous with "innovation" and "cool products". The case reveals how the company lost its edge and describes the leadership initiatives to restore its former glory. In 2012, Kazuo (Kaz) Hirai becomes CEO and successfully transforms Sony, including a relentless focus on differentiation through "wow" products instead of chasing scale. How should he organize and manage the company's response to digital opportunities, such as virtual reality, that could affect the company's entire value chain?

Jun 5, 2018 (Revised: Jan 16, 2020)

Discipline:

General Management

Geographies:

Industries:

Broadcasting and streaming media industry, Electronics manufacturing, Video game industry

Harvard Business School

618045-PDF-ENG

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• Harvard Business School →
• Faculty & Research →
• June 2018 (Revised January 2020)
• HBS Case Collection
• Format: Print
• | Language: English
• | Pages: 25

About The Author

Stefan H. Thomke

Related work.

• Faculty Research
• Sony  By: Stefan Thomke, Atsushi Osanai and Akiko Kanno
• Sony  By: Stefan H. Thomke

Sony and PRINCE2 Agile® Case Study

• Project management
• Project planning
• Project progress

June 26, 2017  |

  7  min read

This Case Study shows how Sony used PRINCE2 Agile® to manage the development and delivery of enhanced functionality for their file-based workflow programme. The driver behind the project was the need to be more responsive to customers’ demands.

As Sony was already a PRINCE2®-aligned organization and wanted to adopt a Scrum-based agile approach, PRINCE2 Agile was chosen as the project management method.

This case study is also available to read in Japanese (PDF, 754KB) .

Introduction

The organization.

Sony Corporation is a multinational organization with its headquarters in Japan. The business includes consumer and professional electronics, gaming, entertainment, and financial services and is one of the leading manufacturers of electronic products for the consumer and professional markets.

The Media Solutions Department is part of Sony Professional Solutions Europe and delivers broadcast equipment, software and media solutions into organizations across Europe. The Media Solutions Department has three key business areas:

• live production, incorporating studios, outside broadcast vehicles and production facilities
• news, covering newsroom editors, agency newswire systems and playout systems
• content management and archive solutions.

Summary of the project and its outcomes 

This Case Study shows how Sony used PRINCE2 Agile® to manage the development and delivery of enhanced functionality for their file-based work flow programme. The driver behind the project was the need to be more responsive to the Media Solutions Department’s customers’ demands.

The system was built around Sony’s Media Backbone Conductor and Navigator products. An infrastructure with base functionality was delivered in the early phases of the project and Sony wanted to continue the development of the product with enhanced features and services. They identified a requirement for a more flexible way of selecting the next features to be developed that would ensure that the needs were always assessed and prioritized.

What was the problem?

Keeping pace with change .

The initial phases of the project involved a long design period, followed by delivery and then deployment of the software. This was usually three to six months after the requirements had originally been agreed, during which time some had changed.

The need for process and technology transformation was driven by the need to realize the benefits of the true end-to-end file-based operation. It was very important to keep all stakeholders involved and part of the process. This included prioritizing features with the user community, measuring return on investment (ROI) and introducing changes in a controlled manner. Key to the success of this project has been the creation of a culture of continuous improvement.

It was essential to improve the sharing of content and automate some of the processes to free up valuable user time for core production activities.

The proposed solution 

As Sony had identified a need to be able to respond to user requirements faster, they decided to consider an agile-based methodology.

The solution had to ensure that:

• new developments are always relevant to the current business needs
• there is flexibility to reprioritize future software deliveries without the need to raise change requests and seek top management approvals.

Project Governance 

The project followed the PRINCE2 governance structure and had a project board with user, supplier and business representation, see Figure 2.1. The structure illustrates how local role names can be mapped onto the overall PRINCE2 governance framework, retaining customer/business supplier representation. For example, the Director of Technology effectively approved decisions around the backlog and was ultimately responsible for acceptance of the product.

Figure 2.1 Project governance structure

Communications, progress and issue reporting were strongly based on the management by exception principle and PRINCE2 reporting guidance. End stage and highlight reports were still used as communication channels between the project manager and the project board.

Aims and objectives

The major objective for the Media Solutions Department was to reduce project delivery time and reduce project risk by increasing product quality. The aims of this work were to create and adopt a workable agile approach under PRINCE2 and to prove it on a real project.

Sony already had PRINCE2 elements in place and delivery teams familiar with agile development. The approach was to combine the two, using the PRINCE2 Agile approach, to make sure that the strengths of PRINCE2 were not lost in using agile: in particular, the governance, communication and quality management aspects.

The adoption of a PRINCE2 Agile approach has been phased into the organization, partly through training and partly through adoption and implementation of the method.

We started by involving the delivery project managers, but then realized that all the stakeholders across the business needed to be engaged to achieve the desired improvements and flexibility in delivery.

The approach required more user involvement during development than the previous development method, but provided better business value because the solutions solved the business problems of the user stakeholders. Frequent demos took place involving the user stakeholders which encouraged discussion of the product features during development. The user acceptance process was much easier than in previous projects as the users were already familiar with the products and had been involved in their evolution through the project.

The development team used automated tools to support agile activities such as backlog management (Figure 4.1), progress tracking (Figure 4.2, sprint report) and Kanban boards (Figure 4.3).

Figure 4.1 Backlog velocity chart

Figure 4.2 Sprint report

Figure 4.3 Kanban board

The project used the PRINCE2 Agile guidance about contracts to help build agreements with their clients based on throughputs rather than end products alone. Traditional fixed price and scope or time and materials contracts were not suitable, so a new model based on throughput of functionality was established. Developer estimates based on planning poker sessions fed directly into this mechanism, and the customer was directly involved in the sessions to ensure confidence and integrity in the process.

Sony has been a PRINCE2-aligned organization for some time and is used to delivering predominately hardware/software application solutions in a traditional design, build, and commission approach.

We quickly realized the limitations of this process, as our software offerings became more customizable and projects started to exceed a three to six month turnaround. Therefore we needed to look at:

• the end-to-end lifecycle
• how we identify agile-based opportunities, and when agile might not be applicable
• contracts for agile projects
• manage the sprints of specification and delivery
• supporting a continuously evolving live environment through new services, changes in workflows, partners or integrated systems.

One of the key challenges was setting up a commercial and legal framework which supported the scope not being fixed until the start of each sprint, and without the overhead of using the existing change control process. This was addressed by using an agile approach to building agreements based on throughputs.

What was the biggest success factor?

From a Sony prospective, PRINCE2 Agile has enabled us to better manage the changes delivered to the users. The methodology has allowed us to reduce the overheads of change requests/impact assessments and to focus on delivering exactly what is needed and ultimately supporting the acceptance of the delivery and faster release back into the operation.

Benefits already realized

The project has already resulted in reduced delivery costs because of:

• less upfront design
• simpler contracting of projects
• shorter time to completion, roll out
• minimized rework
• reduced administration through the use of automation tools.

All of which have contributed to increased customer satisfaction because of:

• better customer engagement during the project
• better alignment to business needs
• more of the required features being delivered.

Lessons learned

1. Initially we took the decision that going agile would be mainly for project managers involved in product delivery and our in-house development teams. This proved to be far from reality. It is key to involve everyone from account management and sales, bid teams, architects, support, legal and procurement teams, so that the entire lifecycle can be assessed.

2. All parts of the organization need to understand the agile approach, not just the delivery project managers.

3. Sales and bid managers, support managers and engineers, need to agree on how to sell the approach and then support the solution as more features are being developed.

Axelos’ view

Combining the governance strengths of PRINCE2 with the flexibility of agile delivery was the driving force behind AXELOS’ development of PRINCE2 Agile. The Sony experience is a very good example of how the benefits of both PRINCE2 and agile can be brought together to provide a delivery solution that matches the project environment.

As experienced PRINCE2 users, Sony recognize the need for good project governance and have retained the strengths of PRINCE2’s controls but adapted for agile working. Agile was identified as the appropriate delivery approach to improve delivery times and engage with users. The synthesis PRINCE2 and agile has provided a delivery approach that is already realizing benefits.

About the author

Yucel Timur is Head of Project Management for Sony Professional Solutions Europe, with over 15 years’ project delivery experience in the Broadcast and Media Industry. Yucel has built a Project Management group that is delivering a variety of complex projects across Europe. As Sony’s solutions have become more customizable, the Project Management group continues to adapt processes, techniques and skills to improve project delivery and quality. This supports Sony with the objective of always being at the forefront of delivering solutions into the broadcast industry and is leading the way in providing feature rich tools and applications to customers across the globe.

For more information, visit pro.sony.eu

Camilla Brown has 15 years’ experience in software product development and solution delivery in the broadcast and media industry. During the last few years, Camilla has ventured into the world of project management while still holding on to agile software development processes, bringing change to the way Sony delivers some of its professional solutions.

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Customer Stories / Media & Entertainment

Sony Interactive Entertainment Redefines Online Multiplayer Experiences on Playstation 5 on AWS

Sony Interactive Entertainment (SIE) is a global leader in interactive and digital entertainment that is responsible for creating the world-renowned PlayStation brand and family of products. 

Using the opportunity of a generational jump from PlayStation 4 to PlayStation 5, Sony Interactive Entertainment reimagined its online multiplayer ecosystem to meet game developer and player needs at a global scale. In this GDC session, Sony Interactive Entertainment shares how it reinvented its legacy architecture and uses Amazon Web Services (AWS) to ensure high scalability, availability, and flexibility to meet changing demands for the next generation of play.

To learn more, watch the video and visit AWS for Games .

We are super passionate about creating awesome game experiences, and using cloud services enables us to focus on this."

Benedikt Neuenfeldt Game Experience Solution Architect, Sony Interactive Entertainment

AWS Services Used

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Amazon OpenSearch Service

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Amazon DynamoDB

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Cyber Case Study: Sony Pictures Entertainment Hack

by Kelli Young | Nov 8, 2021 | Case Study , Cyber Liability Insurance

In the final months of 2014, Sony Pictures Entertainment (SPE)—a well-known entertainment company responsible for producing and distributing a myriad of famous movies—experienced a large-scale cyber incident. A foreign hacking group infiltrated SPE’s network via malware, compromising the company’s digital operations and accessing a wide range of sensitive employee data, private emails and upcoming films. The incident led to major disruptions, leaked information and significant controversy surrounding an upcoming movie premiere.

The Sony Pictures Entertainment hack—which was formally attributed to North Korea as an attempt to prevent SPE from releasing a political comedy film centered around assassinating the nation-state’s leader—has since become known as one of the worst cyber incidents in the entertainment industry’s history, showcasing the importance of safeguarding company data and intellectual property. In hindsight, organizations can learn various cybersecurity lessons by reviewing the details of this incident, its impact and the mistakes SPE made along the way.

The Details of the Sony Pictures Entertainment Hack

In June 2014, SPE released the first trailer for a comedy movie titled “The Interview” to the public, stating an October 2014 release date. The film’s plot focused on two Americans who run a popular talk show getting recruited by the Central Intelligence Agency to interview Kim Jong-un—North Korea’s political leader—and assassinate him in the process.

From there, the film’s distribution was rescheduled for Dec. 25, 2014.

On Nov. 24, 2014—approximately one month before the movie was set to be released—SPE’s network was compromised by a foreign hacking group known as the Guardians of Peace (GOP) via an advanced form of malware. This malware was able to evade SPE’s antivirus software and came equipped with a digital backdoor that allowed the cybercriminals to repeatedly enter the company’s network. Upon logging into their workplace devices that morning, SPE employees were met with a daunting message from the GOP. This message stated that the cybercriminals had stolen several terabytes of SPE’s sensitive data and intellectual property, wiped the original copies from all company technology and planned to release this information if SPE failed to meet their demands. Initially, the GOP demanded money in exchange for the restoration of SPE’s data.

At this time, SPE did not respond to the cybercriminals’ demands. But the company’s network was still largely compromised, causing them to shut it down temporarily. It took several days for IT professionals to repair SPE’s damaged technology, forcing employees to conduct tasks without their workplace devices and significantly disrupting digital operations. Employees had to resort to using old fax machines, issuing paper checks, writing on whiteboards and scheduling exclusively in-person meetings while the company’s network was down.

Even after SPE regained access to its network, the GOP maintained a hidden entry point through the malware’s digital backdoor. As a result, the cybercriminals proceeded to leak the company’s information to both the media and the general public over the next several days. This leak included thousands of current and past employees’ personal records (e.g., names, addresses, contact information, network credentials, Social Security numbers, insurance plans and salary data), as well as a variety of private emails between SPE employees and film executives. Further, the GOP posted five of SPE’s films on digital sharing sites—four of which hadn’t been released yet. Consequently, these movies were illegally downloaded millions of times. At this point, the GOP’s demands changed. In exchange for preventing further data leaks, the cybercriminals demanded that SPE cancel the distribution of “the movie of terrorism”—which was assumed to be referring to “The Interview.”

On Nov. 28, 2014, several media organizations released initial details regarding the ongoing hack to the public. During this time, the media began speculating whether North Korea was responsible for the incident. However, the nation-state denied involvement. Despite the leaked information, SPE pressed forward with its film release plans. That is, until Dec.16, 2014, when the GOP called out “The Interview” by name and used increasingly violent language to demand the film’s distribution be canceled. The cybercriminals’ message referenced the Sept. 11, 2001, terrorist attacks and threatened to cause physical harm at any theater that screened the film. This threat prompted the FBI to launch an official investigation of the incident and led SPE to cancel the movie’s release the following day.

Yet, on Dec. 19, 2014, the Obama administration claimed that shelving the film was a mistake and doing so would only reward the GOP’s unacceptable behavior. The U.S. Department of Homeland Security also confirmed that there was no evidence of any actual plot to cause harm at theaters planning to show the film. As such, SPE announced that it had reversed its decision on Dec. 23, 2014, and released the movie two days later to over 300 independent theaters that were willing to screen the film. Because many large theater chains still refused to show the movie, SPE also decided to release it during the opening weekend on several video-on-demand platforms, such as YouTube and Google Play. The GOP’s threats ceased following the movie’s distribution.

After completing its investigation of the incident, the FBI confirmed that North Korea was likely responsible, seeing as the malware’s code was written in Korean and the hackers’ IP addresses were traced back to the nation-state. Nevertheless, North Korea still denies being involved.

The Impact of the Sony Pictures Entertainment Hack

SPE faced several consequences following the large-scale incident. These include the following:

Recovery costs SPE is estimated to have spent at least $35 million in the process of recovering from the hack, consisting of expenses related to informing impacted employees and U.S. authorities of the incident, hiring IT professionals to recover the company’s compromised technology, conducting an internal investigation of the hack and implementing improved cybersecurity measures to prevent future incidents.

Lost revenue Apart from recovery costs, the incident likely contributed to reduced revenue for several of SPE’s film releases. First, the mixed distribution of “The Interview” between independent theaters and online platforms due to the hack somewhat diminished the movie’s box office success, seeing as SPE lost any revenue that would have been made from large theater chains screening the film. While the movie grossed $40 million in digital rentals, it only generated $12.3 million in box office ticket sales—representing a relatively small overall profit against a $44 million budget. In addition, the GOP’s leak of four other SPE films on digital sharing sites before their theatrical releases probably minimized those movies’ box office ticket sales, considering some individuals subsequently downloaded and viewed these films early (and for free).

Reputational damages Following the incident, SPE faced widespread criticism. In terms of cybersecurity, the company experienced scrutiny for failing to utilize various measures that could have helped protect against the hack. Although IT experts confirmed that the GOP’s malware would have been difficult for even the most sophisticated companies to stop, SPE’s protocols for safeguarding its sensitive data, email systems and intellectual property were inadequate. The company’s valuable records were stored in poorly protected locations with obvious file names (e.g., “Computer Passwords”). Further, SPE’s company email settings allowed for up to seven years’ worth of messages to remain within the network, giving the GOP access to a plethora of communications. Regarding SPE’s overall reputation, the GOP’s leak of private emails painted the company badly on various fronts. Some of these emails disclosed the details of sensitive company matters (e.g., ongoing negotiations with other film studios), while other messages revealed offensive comments that SPE executives had made about members of the entertainment industry— including high-profile actors, producers and directors. These emails likely minimized SPE’s reliability across the entertainment industry.

Legal ramifications Lastly, the incident carried numerous legal issues for SPE. Company employees whose records were exposed during the hack filed a class-action lawsuit against SPE, totaling nearly $8 million. This total includes $2.5 million to reimburse employees for potential identity theft concerns, $2 million to offer employees fraud protection services and $3.5 million in additional legal fees. The incident also motivated the Obama administration to update federal regulations to ensure that national officials better respond to cybercrimes involving international parties.

Lessons Learned from the Sony Pictures Entertainment Hack

Several cybersecurity takeaways can be gleaned from the SPE hack. Specifically, the incident emphasized these critical lessons:

Basic security measures can’t be ignored. In the aftermath of the hack, SPE prioritized bolstering a range of their digital protection protocols, especially related to threat detection and email security. Many of these basic measures could have helped mitigate the damages that resulted from the incident. Simple security steps for all organizations to consider include:

• Utilizing various forms of threat detection software (e.g., network monitoring systems, endpoint detection products and patch management tools) and updating this software on a routine basis
• Installing email filters and firewalls to minimize cybercriminals’ access capabilities
• Developing an effective email retention policy to ensure messages are deleted after an appropriate period of time (typically no more than three years)
• Instructing employees to refrain from sharing sensitive data or discussing confidential company details over email

Sensitive data and intellectual property require proper safeguards. One of SPE’s biggest downfalls related to the incident was failing to adequately protect its most sensitive data and intellectual property. There are many ways for organizations to keep such information better safeguarded, such as:

• Storing sensitive data and intellectual property in safe and secure locations
• Encrypting all confidential workplace records and giving them discreet file names
• Restricting employees’ access to sensitive data and intellectual property on an as-needed basis
• Requiring employees to utilize multi-factor authentication before accessing sensitive data or intellectual property
• Segmenting workplace networks to prevent cybercriminals from gaining access to all sensitive data and intellectual property after infiltrating a single system or device
• Conducting routine data backups in a secure, offline location

Cyber incident response plans are vital. When SPE’s network was shut down, its employees struggled to cope and faced significant operational disruptions. This scenario highlighted the value of having a cyber incident response plan in place. This type of plan can help an organization establish timely response protocols for remaining operational and mitigating losses in the event of a cyber incident. A successful incident response plan should outline potential cyberattack scenarios, methods for maintaining key functions during these scenarios and the individuals responsible for doing so. It should be routinely reviewed through various activities—such as penetration testing and tabletop exercises—to ensure effectiveness and identify ongoing security gaps. Based on the results from these activities, the plan should be adjusted as needed.

Targeted, state-sponsored attacks must be considered. Seeing as North Korea was likely responsible for this incident, it’s critical for organizations to be aware of the potential for future targeted attacks or other cyber-related losses stemming from political conflicts. Depending on their specific operations, organizations should evaluate their likelihood of being involved in incidents with foreign attackers and adjust their basic security measures, data protection protocols and cyber incident response plans as needed.

Proper coverage can provide much-needed protection. Finally, this breach made it clear that no organization—not even a major entertainment company—is immune to cyber-related losses. That’s why it’s crucial to ensure adequate protection against potential cyber incidents by securing proper coverage. When securing such coverage, organizations must clearly understand key policy terminology and conditions, particularly as they relate to physical destruction and cyber warfare.

This may entail confirming whether the policy covers physical damage to technology amid cyber incidents (also known as bricking), as well as reviewing policy definitions for “cyber warfare” and “cyber terrorism” to better comprehend how coverage could assist in such circumstances. Organizations should work with trusted insurance professionals when evaluating their policies and navigating coverage decisions.

We can help.

In the unfortunate event that your business falls victim to a cyber attack, of any type, we can help you recover.

Cyber & Data Breach Liability coverages are developing on a daily basis as new threats emerge and new insurance companies enter the market.

Regardless of the type of business, one thing is certain, if you’re a business in operation today, you face cyber risks. Which means you need to thoroughly understand your risk of a loss, how you would respond if a loss did occur, and whether  Cyber & Data Breach Liability  coverage makes sense for you.

The level of coverage your business needs is based on your individual operations and can vary depending on your range of exposure. It’s important to work with an Insurance Advisor that can identify your areas of risk, and customize a policy to fit your unique situation.

If you’d like additional information and resources, we’re here to help you analyze your needs and make the right coverage decisions to protect your operations from unnecessary risk. You can download a free copy of our eBook , or if you’re ready make Cyber Liability Insurance a part of your insurance portfolio,  Request a Proposal or download and get started on our Cyber & Data Breach Insurance Application  and we’ll get to work for you.

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Sony to launch Sony One channels in Europe

March 27, 2024 12.59 Europe/London By Julian Clover

From April, a total of 54 ad-supported channels will be carried on LG Channels, Samsung TV Plus & TiVo+.

“Sony Pictures recognises the potential of the free ad-supported television space to engage new viewers globally with our extensive feature film and TV series catalogue spanning 100 years. Our entry into the FAST space in Europe reflects our dedication to making premium content accessible to audiences on new and important distribution channels,” Pete Wood, SVP, Digital Sales, Distribution, SPE.

Sony One’s channels will be curated and programmed for local markets in different territories, with content being broadcast primarily in each region’s native language. Territories at launch include the UK, France, Italy, Germany, Spain, Sweden, Denmark, Norway and Finland.

The suite of channels includes Sony One Comedy TV including Seinfeld, The Nanny and The Goldbergs; Sony One Thriller TV featuring Breaking Bad (pictured), Better Call Saul and Justified; Sony One Faves with Bewitched, Community and Dawson’s Creek.

In addition to Sony One, SPE’s FAST offerings include Sony KAL Hindi, its Hindi destination in the US and Canada, and its portfolio of Spanish-language FAST channels for the US Hispanic audience; and FAST channels in Mexico and Brazil.

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About Julian Clover

Julian Clover is a Media and Technology journalist based in Cambridge, UK. He works in online and printed media. Julian is also a voice on local radio. You can talk to Julian on Twitter @julianclover , on Facebook or by email at [email protected] .

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