Sony Could Lose $75 Million on ‘The Interview’ (EXCLUSIVE)

The Interview Seth Rogen James Franco

Sony Pictures Entertainment could lose $75 million over the cancellation of its planned Christmas release “The Interview” after theater owners refused to play the picture amid threats of violence from cyber-terrorists who hacked the studio.

That figure includes the $44 million that Sony spent producing the film, as well as the $30 million it shelled out to promote it, according to two people with knowledge of the matter. One of those sources said that Sony had originally planned on spending $36 million to market the picture domestically and was eight days away from premiering it in theaters when it was shelved. That meant most of its billboards, posters, other promotional materials and TV ad spend were already in place.

Insurance will cover a portion of the costs, but not the full amount, these people said.

The studio might eventually succeed in selling off the picture to another party that could release it via video-on-demand or through a subscription streaming service like Netflix. But, at this juncture, it seems unlikely that any company would touch the film out of fear of getting hacked as well.

It is widely believed that “The Interview” may have prompted a sophisticated cyber-attack on Sony that resulted in leaked emails, film budgets and the personal information of thousands of employees. Most major theater chains opted not to screen the film this week after hackers evoked the memory of 9/11 and threatened violence on exhibitors who screened the film and moviegoers. “The Interview” is a comedy starring Seth Rogen and James Franco about an assassination attempt on North Korean dictator Kim Jong-un.

North Korea has been linked to the hack, and an official announcement on the source of the attack is expected in the coming days.

As it became clear that releasing the film posed enormous legal liabilities for both exhibitors and Sony given the possibility that either the hackers could make good on their threat or inspire copycats, a theatrical release became impossible.

The studio may be partially covered by cyber-liability or terrorism insurance coverage, according to Kent Hamilton, president of Front Row, an entertainment insurance broker. If  North Korea is shown to be involved in the attack and the threats of violence that led to the picture’s cancellation, that coverage would help stem some of Sony’s losses.

“At this point they’re probably trying everything they can to recover some of the money,” said Hamilton.

One option that will not be available to Sony is any kind of completion bond, experts say. Those bonds ensure that studios get money back if filming is forced to stop because of the death of a star or another disaster, but “The Interview” finished filming and was safely in the hands of its distributor. Moreover, completion bonds are more common with independent film productions than with studio projects.

“I’ve never heard of a policy that covers a film all the way to when it gets delivered to exhibitors,” said Jeff Steele, a film finance expert. “This is more of a force majeure type of thing where things got out of control,” he added. “It’s more akin to an act of god.”

Sony explored the idea of releasing the picture on-demand and even though analysts believe it would have been among the top-selling titles in the format’s history, it would not have replaced the money lost theatrically.

“In a way it’s the perfect premium VOD title, because there’s huge visibility and people want to see it, but not necessarily in theater,” said Tom Adams, a media research analyst.

But he adds, “As a premium VOD title without a theatrical run it would be almost impossible to make the money back.”

Of course, the true cost of the past few weeks will escalate beyond the money that Sony spent and ultimately will lose on “The Interview.” Repairing the company’s cyber-defenses will cost tens of millions of dollars, and the Japanese-owned studio already faces lawsuits from former employees upset over their leaked personal data.

Filed Under:

Want to read more articles like this one? SUBSCRIBE TO VARIETY TODAY.
Post A Comment 23

Leave a Reply

23 Comments

Comments are moderated. They may be edited for clarity and reprinting in whole or in part in Variety publications.

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

  1. John Shea says:

    No, Mr. Lang. Not impossible. Just very difficult, like many things well worth doing. Meanwhile I do hope some patriots remain within Sony and one of them leaks the movie.

  2. I hope that Sony will consider releasing “The Interview” online. I would pay to see it online. I understand the North Koreans’ ire at a movie portrayal of the assassination of their Beloved Leader, but they went way too far in the expression of that ire.

  3. TV101 says:

    I am not saying they deserve this and I do feel very bad for the entire SPE family on this one BUT I do think at the very start of all of this they shouldn’t have used the real names. They could have VERY easily changed the names and likeness and it would have had the same impact comedy wise. Again, I feel bad for them, I feel bad hackers are making them pull a movie I don’t like that one but. But put all of that aside for one moment and think if a film like this came out about our President. We wouldn’t like it. Why they had to use the real names is beyond me and there — is Sony’s mistake from the start. They didn’t deserve any of this BUT with the power of free speech also comes the responsibility to do the right thing and the smart thing. This wasn’t very smart. No one could have imagined this would happen to SPE but they were not smart to use the real names. They wouldn’t do this about other foreign leaders – so why this one? It was a dumb mistake. If you are going to sell internationally like we all are nowadays – you must think internationally. They didn’t. Hollywood ego took over and still does with these uneducated comments from some of our top “stars”.

  4. Zooey Beare says:

    Put it on YouTube, for free! Let it go viral.

  5. J.E. Vizzusi says:

    Many films throughout hollywood history have been produced and permanently shelved. Although none to the likening of these potential losses. Once the waters calm, I expect a 2nd tier Distributor will fall in place. All this media hysteria has actually caused a much greater demand for the film to br released. Sony I expect will take full advantage of this just at a much later date.

  6. John in AK says:

    I plan on boycotting Sony and all their products until they reconsider. I feel like they. don’t share American values.

  7. drakeca89 says:

    hahhaha cutthroat island was sooooo bad. Just have some balls and release the movie they are North Korea hello we are in NO danger

  8. On the bright side, it’s still much more profitable than Mars Needs Moms or Cutthroat Island.

  9. Ted Trent says:

    Exactly. Now everyone in the world wants to see it.

  10. preuser says:

    The hack was probably conceived before the picture was known about an extortion letter has allegedly
    surfaced that made no mention of the picture and DPRK (or whomever ) just decided to add that in at a later date !

  11. Dark Claw says:

    I wish the could lost the Spider-Man rights ¬¬

  12. CharlesAz says:

    SONY would stand to lose multiples of $75Mil and the theater chains as well. Every party is on ACTUAL NOTICE of threats of harm, vague but the threats are real.. not heeding these vague threats – combined with any and all harms suffered by moviegoers, and there would be a feast of plaintiffs’ attortneys going after all parties inviolved. SONY and the theater chains would be walking into a plaintiff’s buzzsaw if they ignored the threats and went forward.

  13. diyana says:

    that is a ton of money. i think it would be ideal if they released it as a premium VOD asap; better than nothing, and it will probably leak eventually. i’m sure it would be the fastest selling VOD of all time!

  14. Mac N. Tosh says:

    Hey Sony, put it on VOD with all the proceeds going to worthy cause like Susan G. Komen. Get the stars to donate their compensation. Come on Hollywood, lets show these terrorists they can’t defeat us.

    Lets turn this into a positive.

  15. socalcreate says:

    C’mon, ’m sure the Fed has it!! Just mist in the bucket compared to what they’ve given the wealthy on wall street :)

  16. MovieGeek says:

    Only $75? I would have thought even more…

More Film News from Variety

Loading