The Sony Wreck continues

Since the original post was written, the Sony Pictures train-wreck has continued as the first boxcars plow through the rail-side shopping mall. It is becoming a disaster worthy of a Michael Bay extravaganza (minus the fiery explosions). So far:

  • Federal investigators and the United States State Department have confirmed the hack attack was launched by North Korea (though this is still being debated among some IT security experts). Not really a surprise since the North Koreans are the only people on Earth with any reason to be excited by a new Seth Rogen film. Besides, they have previous stated that the movie The Interview was an act of war and that they would deliver an overwhelming response. So they had both a motive and a clearly stated intention.
  • The threat to physically attack every theater in the US showing The Interview has worked despite the fact that this was the most ludicrous plot since North Korea threatened to nuke Austin, Texas. However, theaters are forced to take such threats seriously and would have faced a massive cost over run due to vastly increased security. This is especially a problem because they can’t provide security simply for the one or two screens used for this movie. They have to cover every screen in the multiplex. No theater manager in the country could afford this type of problem.
  • Sony Pictures decision to pull the movie from release was based on a slippery form of studio logic. You see, they didn’t really pull the movie. The theaters refused to show it. So what can they do? Of course Michael Lynton, the CEO of Sony, neglects to mention that Sony told the theaters that it was their call. This means Sony was not going to enforce the standard contact clause that penalizes any theater that attempts to cancel a screening at the last minute. So basically, Sony made the call since they just told the exhibitors they were free to bolt.

From a financial viewpoint, The Interview has become a major disaster. Our own FilmScore® estimate suggests that the movie might have made something in the $71 million range:

Revenue/Budget Ratio: 1.6774

Predicted US box office revenue: $71,008,853

95% confidence level: $31,418,851-$109,994,770

A modest but respectable box office though with its $44 million budget (plus $20 to $30 million PR cost) it would still fall just under the break-even mark.

Now, recent events have raised the cost. Digital security experts have already estimated that the immediate damage from the hack will take about $100 million to correct. By pulling the film from distribution, Sony will lose another $70 to $90 million. In turn, the first wave of civil suits are just now being filed by current and former employees at Sony who have been hurt by the hack. It will be several years before the full cost of damage can be calculated.

Now that The Interview has become an international situation, the costs will continue to climb. This brings us to the next level of discussion: Should this movie have been made?

Obviously, this is the moment that all of us Monday morning quarterbacks live for.