THE WALL STREET JOURNAL/ASIA TECHNOLOGY
TOKYO—The hacker who penetrated Sony Corp.'s online PlayStation videogame service and possibly collected credit-card data from millions of users delivered a blow to the company's long-pursued but elusive goal of linking its consumer electronic devices to an online network of movies, music and videogames. ReutersA screengrab of the Sony PlayStation new account registration website show a notice that the site is down for maintenance Wednesday.
For years, Sony Chief Executive Howard Stringer has pushed the company toward a "network" strategy that envisions its electronic products as gateways to an online network of content rather than standalone devices. The strategy is similar to the way Apple Inc. connects many of its popular products through its iTunes media software. In the ongoing competition with Apple, Amazon.com Inc. and Microsoft Corp.'s Xbox Live service to deliver movies, music and videogames to Web connected devices, Sony Corp.'s main weapon was the 77 million accounts on the PlayStation Network, which is used by PlayStation 3 console users to play game against one another, chat online and download movies and TV shows. With millions of those users having already registered credit cards to the service, Sony had overcome a major hurdle—how to pay for purchases—toward cementing its position. Under a mid-term business plan announced in late 2009, Sony said it aims to have a user base of 350 million network-connected devices while generating revenue of 300 billion yen ($3.65 billion) from the services business. The company declined to offer an update on how it is progressing.
The security problems could unnerve new and existing customers about entrusting personal data with Sony's online videogame service and its other offerings, slowing the progress of its network strategy which already lags Apple and Microsoft. Mr. Stringer has said coupling Sony products with online services is essential to creating brand loyalty and differentiation to break free from the crippling price competition plaguing the consumer electronics industry.
"In an environment where it's difficult to turn a profit on hardware, Sony has pushed for the integration of hardware, software and the network to make money. To have this happen now is really unfavorable," said Nobuo Kurahashi, corporate research analyst at Mizuho Investors Securities in Tokyo. Sony said Wednesday it will stick with the strategy. "This incident doesn't change Sony's fundamental strategy of networking products and providing services to our customers," said spokesman Shiro Kambe.
In a statement on its Web site, Sony's PlayStation unit said the network had been offline for a week after an "illegal and unauthorized intrusion" that resulted in the loss of personal information including names, birthdates and possibly credit card numbers. Sony said it is investigating the breach and expects some services to be back online next week.
Furious users vented on social networks such as Twitter asking why the personal data wasn't encrypted. Sony said credit card information was encrypted. As of Wednesday afternoon in Tokyo, Sony said, there have been no reports that the breach resulted in user data being exposed on the Internet or fraudulent credit card charges. The company didn't disclose whether it determined that credit-card information had in fact been stolen, or how many people might be affected by such theft.
The PlayStation Network, launched in 2006 to allow PlayStation 3 console users to play games online free of charge with one another, is at the heart of Sony's online content delivery strategy. While online game play is still free, the service has evolved over time to allow users to pay and download movies, television shows and videogames. For example, Sony charges about $2 for users to download an episode of the animated TV comedy "Family Guy."
Last year, Sony relied heavily on the PlayStation group's experience to launch its Qriocity online platform to offer streaming video and music services. The company also tapped into the PlayStation Network's technological infrastructure—data centers and payment systems—to serve as the backbone for its latest online services.
While the security problem remains a concern, Sony is aggressively pushing new products to tap into its growing collection of services.
The company said in January that it plans to launch by year-end a new handheld game machine codenamed Next-Generation Portable that will access the PlayStation Network. Mr. Stringer has also said it aims to have smartphones from its mobile phone joint venture Sony Ericsson connect to the Qriocity platform for streaming video and music in the future.
On Tuesday, Sony said it will enter the fast-growing tablet computer segment with two products later this year. The tablets will also connect to Qriocity as well as Sony's electronic bookstore. Kunimasa Suzuki, a Sony executive overseeing the development of new network-connected mobile products, said he sees the new tablets being the "hero" of the company's strategy to integrate services and hardware.
