Sony Cancels ‘The Interview’ Release. Buying Opportunity?

December 18, 2014 0 Comments

The Interview,’ starring Seth Rogan and James Franco, was scheduled for a big premier release on Christmas, and was a highly anticipated film to see this holiday weekend. Now it appears people will just have to settle for watching ‘Unbroken’ instead, as five major theater chains, including the Canadian firm Cineplex, have dropped plans to show the movie due to ‘security concerns.’ Sony hackers threaten to attack movie theaters that choose to screen ‘The Interview’ on Christmas afternoon.

Some people might find this surprising, but who could forget the infamous cyber attack on the Playstation Network by the hacker group Anonymous? There has also been plenty of attacks on Sony since then during 2012 – 2013, including Sony Pictures, The Playstation Network and many other divisions of the Sony Corporation. Not to mention, less than  a month ago, there was a large security breach at Sony, in which hackers stole detailed personal information of more than 6,000 employees. So this particular incident comes as no surprise to anyone who has paid attention for the last couple of years. Regardless of the circumstances, lets give it up for the least secure company in America!

The hacker’s ransom demands, from Variety Magazine:

Warning

We will clearly show it to you at the very time and places “The Interview” be shown, including the premiere, how bitter fate those who seek fun in terror should be doomed to.
Soon all the world will see what an awful movie Sony Pictures Entertainment has made.
The world will be full of fear.
Remember the 11th of September 2001.
We recommend you to keep yourself distant from the places at that time.
(If your house is nearby, you’d better leave.)
Whatever comes in the coming days is called by the greed of Sony Pictures Entertainment.
All the world will denounce the SONY.

Well, I don’t know how we are going to understand what an awful movie Sony has made if you prevent Sony from showing it to us. Maybe this terrorist was referring to a direct Video on Demand (VOD) release. That seems the most plausable now that we have all but given into their demands. Perhaps a Pay-TV operator could strike a VOD deal to rescue Sony Pictures…

Or, we can find the people responsible and do something about it:

American intelligence officials have concluded that the North Korean government was “centrally involved” in the recent attacks on Sony Picture’s computers, a determination reached just as Sony on Wednesday canceled its release of the comedy, whites based on a plot to assassinate Kim-Jong-un, the North Korean leader.

Senior administration officials, who would not speak on the record about the intelligence findings, said White House was still debating whether to publicly accuse North Korea of what amounts to a cyberterrorism campaign. Sony’s decision to cancel release of “The Interview” amounted to a capitulation to the threats sent out by hackers this week that they would launch attacks, perhaps on theaters themselves, if the movie was released.

Officials said that it was not clear how the White House would decide to respond to North Korea. Some within the Obama administration argue that the government of Mr. Kim must be directly confronted, but that raises the question of what consequence the administration would threaten — or how much of its evidence it could make public without revealing details of how the United States was about to penetrate North Korean computer networks to trace the source of the hacking.

I don’t know how anyone didn’t see this coming, but I guess, for now, we aren’t going to do anything about it. As I have obviously mentioned before, security isn’t the strong suit at Sony Corporation. However, could this fiasco become a buying opportunity for Sony? I wouldn’t count on it.

If Sony isn’t good at making video games, one thing is certain, it is very good at losing money. The last time the company has made a profit was in 2007, and share prices are down 26% percent in five years. The company is still trying to control cost by eliminating money losing divisions. You would probably think that their security division would be the first to go, but the company has already fired most of them already. However, when you look at the financials, Sony has reported revenue of ¥7.767 trillion. That comes to about $65.342 billion in US dollars with the current exchange rate of 118.87:1. With the current market cap of $23.5 billion, this means you’re paying 35 cents for every dollar of sales, which isn’t bad at all (it’s actually cheap).

And the reason why I use Price-to-Sales and not Price-to-Earnings is because 1) companies that are not profitable have no PE ratio and 2) P/S ratios are a good way of capturing valuations of companies that have revenue streams but are not quite profitable. When we look at other companies that are into electronics or entertainment, the company is much cheaper. With companies like Apple, Disney and Viacom, shareholders are paying anywhere from $2 – $4 in equity/valuation. Sony’s current P/S is good if you’re expecting the price of the stock to increase in the future, and this incident has not seemed to harm Sony shares at all.

Overall, I wasn’t planning on seeing ‘The Interview’ (not on Christmas day or weekend, at least) but this could result in some good publicity for Sony and the movie. I don’t think its going to skyrocket the fame of Seth Rogen or James Franco, but this can build the sympathy it needs to grab more sets at the box office, provided that Sony and theater chains ever decide to put thus film back on the big screen.

 

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