By Takashi Mochizuki
TOKYO--Sony Pictures Entertainment's three-week struggle with
hackers upset about its North Korea movie "The Interview" has
highlighted the unit's independence from its Tokyo parent, Sony
Corp., which has mostly taken a hands-off approach to the
problem.
A Sony spokeswoman in Tokyo said Thursday that the decision to
pull the movie from U.S. screens was made by the Los Angeles
studio, and Tokyo was informed afterward.
The Japanese electronics giant bought the film company, then
known as Columbia Pictures Entertainment, in 1989 as a part of its
strategy to strengthen its content offerings and seek synergies
with the hardware business. Sony paid $4.9 billion, which made it
the most expensive acquisition of a U.S. company by a Japanese firm
at that time.
Amid frequent losses at other Sony businesses, the movie arm has
been a stable source of revenue, generating $504 million in
operating profit in the year ended March 2014. "The entertainment
unit is an important pillar for us," Sony Chief Executive Kazuo
Hirai said at a November meeting with investors.
Hollywood-based executives have largely run the unit with
relatively little direction from Tokyo, according to people with
experience in Sony's operations. A former Sony senior official said
people at headquarters consider the U.S. subsidiary a completely
different entity and are aware that the studio doesn't like to be
ordered around by Tokyo.
In one instance, headquarters sent some people to the U.S. to
work at Sony Pictures, he said, "but the studio returned them
quickly, saying they don't fit its culture."
Unlike most Sony executives, Mr. Hirai started in the U.S., at
the company's music unit. He has tried to bring every branch of the
company together under his slogan of "One Sony" to make the most
use of Sony's assets--including hardware, software and network
services.
The 53-year-old CEO made a rare decision to intervene in the
movie studio's daily operations earlier this year. Leaked emails
show that on several occasions he expressed concerns about the
movie's script, in which North Korean leader Kim Jong Un is
assassinated.
In one cut, "there is no face melting, less fire in the hair,
fewer embers on the face," motion picture chief Amy Pascal wrote to
Mr. Hirai, regarding a scene in which Mr. Kim's helicopter is hit
with a missile and his head explodes in flames. Mr. Hirai in turn
asked Ms. Pascal try to get filmmakers to cut the scene further and
remove it from the international version of the movie.
Despite those interactions, people familiar with the matter said
there were only a few executives in Tokyo, including Mr. Hirai, who
were frequently briefed on the issue. Most Tokyo employees weren't
aware of the movie before it came under the media spotlight, they
said.
Since the hacking first emerged publicly Nov. 24, the Tokyo
parent company hasn't released any statements or made any public
moves in response to the crisis.
"It's very reasonable that the issue is handled by the U.S.
because that's where the incident is playing out, but Sony in Tokyo
could have at least issued a statement or two--say, apologizing for
concerns or worries that the issue might have caused," said Yu
Okazaki, an analyst at Nomura Securities.
It's not the first hacking attack for Sony. Its videogame
division suffered widespread cyberattacks in 2011. At that time,
more than 77 million accounts were affected and Sony spent three
months to fully restore the service. After that, the company
created a team, led by its chief information security officer, to
beef up defenses.
Online security professionals say the latest hacking case is
different in nature from the 2011 case and Sony is less to blame
given the sophistication of the attack.
People at Sony in Tokyo say the affair hasn't changed Mr.
Hirai's confidence in the powerful duo running his Hollywood
business--Ms. Pascal, who is co-chairman of Sony Pictures
Entertainment, and Michael Lynton, chief executive officer.
While Sony's stock price has fallen somewhat in the past two
weeks, it is still one of the top performers in the Tokyo stock
market this year. The share price has risen more than 50% over the
past six months as investors gained confidence that the company's
electronics arm is recovering from years of weak results. On
Thursday, Sony shares traded up more than 4%, outperforming the
benchmark index.
Yasuo Nakane, an analyst for Deutsche Securities, said the
incident shouldn't significantly affect the financial performance
of Sony as a whole, although he said it was hard to calculate at
this stage how much damage the studio would suffer.
Write to Takashi Mochizuki at takashi.mochizuki@wsj.com
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