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Sony’s costly mistake

In an effort to restore customer faith in the company, Sony Computer Entertainment has finally begun sending emails to PlayStation Network account holders with information on obtaining free identity theft protection. Furthermore, Sony will offer free content in an attempt to keep many dissatisfied customers from jumping ship. I personally have no knowledge of this, due to the fact that I still have limited access to the PlayStation Network. Quite frustrating I must say! It has been several weeks since Sony’s PlayStation (PS3/PSP games) and Qriocity (movies and music) networks have been hacked, but why has the company taken so long to take action to protect customers? The network intrusion apparently occurred between April 17 and April 19 and it took Sony a week to report the break in to the public. As a precaution Sony took their network offline and had originally anticipated only a couple of days of downtime, however the extent of the breech was severe enough to require additional time, while partial network access was available on May 31st, full access was still limited in some territories.

Screen capture of an email from Sony with Debix identity theft offer.
Click image to view full size.

I personally received an email from the PlayStation Network with instructions to submit my email address and upon PlayStation account verification I would receive an activation code to retrieve twelve months of free identity theft protection from Debix. It is believed that the names, e-mail address, birth dates, passwords and credit card information of 70 million users may have been compromised. In addition, profile data, purchase history and security answers were also compromised, which in the wrong hands can be used for fraudulent activity because many people use the same passwords and challenge questions for all of their accounts.

Sony’s CEO Howard Stringer was criticized for brushing aside allegations that consumers were not immediately notified of the security breech and faced further criticism for not apologizing, stating that “many companies do not report security breaches and those that do may take up to 30 days to do so.” In stark contrast, Stringer’s second in command executive vice president Kazuo Hirai held a press conference in Tokyo東京 addressing the serious nature of the attack and offered an apology all while bowing deeply to those in attendance. With Sony shares taking a 5.2 percent dip in April, and the company spending 14 billion yen (roughly $171 million) to cover the cost of identity theft insurance for consumers, revamping network security, customer support, free content and private investigations, things could get ugly for executives. Furthermore, adding insult to injury Sony Corp. is anticipating an annual loss of $3.2 billion due to a slump in sales of flat screen television and other electronic products.

What does this mean for Sony’s future? Due to the popularity of games such as “Call Of Duty,” “Killzone” and “SOCOM,” (to name a few) many users are not likely to walk, but the structure of the company may see some changes. Purely speculation on my part, but CEO Howard Stringer, once hailed as Sony’s savior may soon be checking the “help wanted ads” for a new gig. Did Sony drop the ball? Has the company made some poor decisions that may have cost them their competitive edge? Phil Harrison, Executive Vice President of Sony Computer Entertainment Europe, has expressed frustration with the headquarters in Japan for not taking the implementation of his ideal to utilize social gaming serious until Nintendo beat them to the punch.

“It’s frustrating for me to experience, because I’ve been saying for years that playing games together is the future, but the guys in Japan [Sony] said that people just didn’t play that way,” he said.

– VP Sony Europe

The final outcome is still unknown as the matter is currently under investigation by the Federal Bureau of Investigation (FBI) and the United States Justice department. In an interview with Reuters, U.S. Attorney General Eric Holder commented on the situation stating, “It is something we are taking extremely seriously.” It will be interesting to see how Sony will recover from this incident.

Related Story – Foreign CEOs make it big in Japan.

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