Monday, December 22, 2014

How Sony can capitalize after pulling 'The Interview'



I don't fully understand a lot of what's going on behind the scenes at Sony Pictures, but I know things got serious (and I mean really serious) over the past few weeks. Just recently, news dropped that they decided to pull the plug on showing their upcoming movie The Interview, starring James Franco (@JamesFrancoTV) and Seth Rogen (@Sethrogen). The reason is tied to what the movie is about and threats of terrorist activity. From those threats, the movie theaters backed out, and from there Sony ultimately backed out too.

But instead of getting into what the movie is about, you can just read the synopsis here while I get to the delicious economic opportunity that Sony Pictures has in front of them!

What we know




Just a few weeks back, news broke that Sony Pictures had been hacked by a group of hackers instructed by the North Korean government (or at least that's what we think), leaking important documents, e-mails, salaries, etc. What was leaked ended up circulating the web and was a cause for a wide variety of serious discussion, but whether you believe the media had a right to circulate it or not, the damage was already done.

The company is left dealing with a PR nightmare along with capital-related setbacks, adjusting their fixed and variable costs by replacing hardware and hiring personnel to help them fix their net security issue. On top of that, their workers are filing lawsuits, charging the company with failing to protect their privacy. And all of this happened prior to canceling the release of The Interview. Talk about adding salt to the wound.

Why Sony is able to capitalize: scarcity and national identity

But if you were to ask me if I thought they can bounce back from all this, I would give you an enthusiastic yes, and the reason boils down to narrative, value and scarcity. Usually, economic value is measured by the most someone is willing to give up in other goods and services in order to obtain a good, service, or state of the world. In the movie business, with a fixed price set for movie goers, their value is more or less measured in the amount of visits to the theater.

Despite this financial hit for pulling the movie, Sony can still earn a sizable profit on the interview because the movie has picked up a lot more buzz than was initially created before the scandal. For one, you can think of it hypothetically. After Sony decided not to show it, the movie did all of a sudden became a scarce commodity, which naturally generates more demand for any product. And it helps Sony that the movie is not really circulating online, but this is just ha
lf the point I'm trying to make. Furthermore, you can think about it symbolically, where the hackers (whether under North Korea or not) ended up turning a silly comedy (that I wasn't going to bother watching before all of this) into a must-see movie, at least for Americans.
Following the terrorist threats and the Sony decision, other studios followed suit. According to engaget, Paramount Pictures decided to pull screenings of Team America: World Police (a 10-year film which featured a North Korean dictator as the villain) and film studio New Regency (co-owned by Fox and Warner Bros.) canceled its plans to produce a film adaptation of the graphic novel Pyongyang.

In a country that takes pride in freedom of expression, you can imagine why these series of decisions were frustrating for the average American to see. Even though Sony's move is inherently a smart one when you consider a terrorist threat in the mix, the conventional wisdom sees it as more about a shot to the national narrative and the outcry is, in part, about repairing that identity.

In growing numbers, Americans are expressing their support to have The Interview distributed to the public (however that happens) because watching it became a concern of national identity, and what better better response would their be than to show it as a way to fix uphold that nation identity and stick it to the enemy? This is the audience The Interview has going for it, and Sony would be smart to take ownership of distributing it while its still hard to find online.

Suggestion for Sony: Pull a Beyoncé

There are many different ways Sony can distribute The Interview. While they are weighing their options, I hope one of the considerations is to release it theaters unnounced. Remember back in 2013 when Beyoncé surprised the world when she released her visual album, "Beyoncé", unannounced? That album spent its first three weeks at No. 1 with sold 1.43 million copies sold in just 4 weeks alone. The Interview might not make Guardians of the Galaxy type of money, but the popularity should catapult its revenue intake beyond its expected box office numbers. It would be a shock, and a good one that might find itself within the top 5 or 6 box office movies for a large number of weeks (especially if the movie is a good film). One downside to showing it in theaters is the possibility that a lot of people wont show up because they don't want to take any risks.

On the other hand, the possibility of showing it online is always there too, but there is also the risk of exposing it online leakage, and those who probably wouldn't mind seeing it in theaters have no incentive to bother since they can see it for free.

But in the end, with whatever they want to do, I think they need to do it as soon as possible while the movie is still relevant and there is little competition.

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