Japanese entertainment and technology giant Sony faces a battle to regain the trust of millions of consumers after online networks integral to its strategy were hacked, say analysts.
One of the biggest data breaches since the advent of the Internet could cost it around $1 billion, but deeper damage to Sony’s brand image could undermine efforts to link its gadgets to an online network of games, movies and music. “It is difficult to make profits on such devices without networking functions,” said Mizuho Investors Securities analyst Nobuo Kurahashi. “What is necessary is for Sony to restore consumer confidence.”
The cyber attacks on Sony in recent weeks involved the theft of personal data that include names, passwords and addresses from more than 100 million accounts on its PlayStation Network and Sony Online Entertainment services. Sony has said it cannot rule out that millions of credit card numbers may have been compromised and has delayed the planned restart of PlayStation Network and Qriocity music streaming services after shutting them down.
Already reeling from the impact on production and output of Japan’s March 11 earthquake and tsunami disaster, analysts say Sony faces further costs in beefing up security and compensating consumers. The breach is a blow to the firm’s drive to push its content through its game consoles, smartphones and tablet computers amid competition from Apple’s iTunes and App store and hardware rivals such as Nintendo and Samsung. Consumer trust in security is crucial to the success of such “cloud-based” systems, say analysts, and the fact that Sony failed to encrypt some of its customers’ personal data has undermined confidence, they say.
“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,” said Jay Defibaugh at MF Global in Tokyo. “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.” The Playstation Network system was launched in 2006 allowing gamers to compete online, stream movies and access other services via the Internet. Along with the Qriocity music streaming service, it was shut down on April 20 following the breach and has remained offline as the company upgrades security and works with the US Federal Bureau of Investigation.
