Hackers have stolen data from 77 million Sony PlayStation users

Sony faces legal costs of up to $1.5bn after data breach

Sony could face legal action around the world after it delayed revealing a major security breach of its PlayStation Network.

Shares have tumbled five per cent in Tokyo and gamers have threatened legal action after hackers stole names, addresses and possibly credit card details from 77 million users.

Sony shut down the network last week after discovering the breach, one of the biggest online data infiltrations ever, but did not tell the public about the theft until a week later.

"Gamers are angry that Sony's CEO hasn't come out to explain the situation and investors are disappointed over the company's corporate governance," said Michael Wang, manager of overseas funds at Prudential Financials in Taipei, which owns shares in Sony.

Sony's PlayStation Network, a service that produces an estimated $500 million in annual revenues, provides access to online games, movies and TV shows.

Nine out of 10 of PlayStation's users are based in the United States or Europe.

Gamers could ditch Sony and analysts said people looking to buy a video game console could steer toward Microsoft Corp's Xbox, which has its own popular online network.

"I am outraged that my personal information may have been accessed by hackers," said Rich Chiang, a PlayStation and Xbox user in Shanghai.

Security experts said Sony would need to account for the loss of business and damage to its brand when it tallies up the cost.

Other costs include notifying customers of the attack and bringing in experts to cleanse its network.

Larry Ponemon, chairman and founder of the Ponemon Institute, said the theft could cost Sony more than $1.5 billion, or an average of $20 for each of the 77 million customers whose data was potentially compromised.

Sony said the delay in notifying the public was needed to conduct a forensic investigation but its CEO Howard Stringer and number two Kazuo Hirai have not commented publicly.

Sony shares closed down 4.5 per cent after falling more than five per cent at one stage, while the broad market rose 1.6 per cent.

The stock has now lost more than eight per cent this week, however some fund managers said the impact might be contained.

"Shares of Sony have already reached the low since the earthquake so I think further downside is limited," said Prudential Financial's Wang.

"Investors who buy Sony are buying on its growth in PlayStation - gamers usually will not stop playing just because a single incident."

UK government watchdog the Information Commissioner's Office says it has contacted Sony and has launched an investigation of whether it violated laws that require it to safeguard personal information.

The commissioner's investigation would depend in part on whether Sony stored user information in Britain.

In the United States, several members of Congress have seized on the breach while Rothken Law Firm filed a lawsuit in California on behalf of consumers.

Attorneys general, who act as consumer advocates, are investigating the incident while US regulators including the Federal Trade Commission could also get involved if they determine Sony failed to tell its customers about the company's privacy policies.

Sony has also reported the breach to the FBI's cybercrimes unit in San Diego, which is investigating, an anonymous source told Reuters.

The company may also come under tough scrutiny from non-U.S. regulators, which have stricter consumer privacy laws.

"European countries are going to go crazy and be all over this," said Dan Burk, a professor at the University of California, Irvine School of Law.

"They are absolutely obsessed about companies holding personal information."

Recent articles

Info Message

Our sites use cookies to support some functionality, and to collect anonymous user data.

Learn more about IET cookies and how to control them