Sony loses face over theft of PS3 data

The online thieves who stole personal data belonging to more than 70m Sony PlayStation users have compromised the digital security of gamers and the Japanese technology company’s reputation.

Sony has come under fire for failing to inform customers of the theft, which included names, addresses and network passwords, until one week after its PlayStation Network, the online platform that allows users to download software and join multiplayer games, was shut down following an “unauthorised intrusion”.

On Wednesday, Sony declined to say when the company had become aware there was a significant risk that data had been stolen.

It said it had moved “as fast as possible” to tell customers after performing necessary checks.

“When you are involved in a networked business like this, this sort of danger exists. We have to keep strengthening our security systems,” Sony added.

The group’s shares shed 2 per cent on Wednesday in Tokyo.

It is too early to say whether Sony’s response to the security breach will leave it looking more like an offender than a victim.

But poor communication has helped turn technical problems into nightmares for other Japanese companies, including Toyota, another of the country’s best-known brands, which was criticised for slow disclosure a year ago amid a series of safety recalls.

What is certain is that the data theft has hit at the core of Sony’s vision for the future of its business.

Networked gadgets such as the PlayStation are taking an ever-larger role in Sony’s strategy.

The group, which is in the middle of a painful restructuring, is betting on its ability to fuse hardware and entertainment to counter cheaper rivals from South Korea and more digitally savvy ones – most notably Apple – from Silicon Valley.

That fusion increasingly involves the internet and all the risks and benefits that come with it.

Until now, at least, the PlayStation Network platform had been so successful that its infrastructure, including account and payment systems, was adopted for other Sony digital initiatives such as its Qriocity movie and music download service.

So far this year, Sony has unveiled several devices whose enhanced networking capabilities have been touted as core functions: the latest version of its handheld PlayStation Portable (PSP) console, a Sony Ericsson “PSP Phone” and, on Tuesday, two tablet computers designed to compete with Apple’s iPad.

It is also planning a PlayStation Store for Android phones and tablets, from which users would be able to download games and other content – taking a page from Apple’s iTunes and App Store content-distribution businesses.

The data theft “is a problem because it is directly related to the launch of the new tablet,” said Pelham Smithers, an independent stock analyst who follows Sony.

The company made its digital strategy clear last month, when it promoted Kazuo Hirai, head of its “networked products” group, which includes PlayStation, to its top executive tier, making him the most likely successor to Sir Howard Stringer, president and chief executive.

In the quarter to December 2010, the network products group earned Y45.7bn ($553m), double the level of a year earlier, while profit at the more traditional consumer electronics business fell 47 per cent to Y26.8bn.

Sony hopes to do for TVs and other devices what Apple has done for music players and mobile phones – by using gadgets to sell digital content and services, and content and services to sell more gadgets.

Such initiatives require the handling of more customer information and more content and could be threatened if customers no longer trust Sony to do so.

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