Sony Scrambles to Calm Gamers Outraged Over Security Breach

Offers Freebies and Apologies as Some Consumers Threaten to Defect

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With the Sony PlayStation Network still down for 77 million users two weeks after a hack was discovered, and the extent of damage from compromised customer data still unknown, many U.S. gamers are not only frustrated, but also angry, posting complaints on social media, and in a few cases, filing lawsuits.

Sony did promise in a Thursday blog post -- the principal way it has been communicating its actions -- that it is in the "final stages of internal testing of the new system."

However, even with the restoration of the network, their troubles will not be over. Analysts have estimated the security breach alone could cost Sony $2 billion or more to clean up.

"Sony faces a huge problem trying to restore consumers' confidence and there is no way of denying that their brand has been damaged," said Sebastian Moss, managing editor for online blog PlayStation LifeStyle. "For potential customers. . . . Sony will have a problem convincing them now that the network is secure and that will likely affect many PlayStation 3 purchase in the short term, and still others in the long term."

PlayStation is beginning to try to make amends with customers. The company outlined on Thursday its offer of free enrollment for one year in "AllClear ID Plus " for all U.S. PlayStation Network and Qriocity accounts. Earlier in the week, Sony PlayStation communications director Patrick Seybold posted that it will offer a "welcome back" program once the network is restored that will include free downloads and memberships.

Sony did not respond to queries about the possibility of a marketing or advertising campaign to address the problem. A spokesperson for PlayStation ad agency, Deutsch, referred questions to the client, but did say that they have not been asked to pull advertising and that everything is "being handled on a corporate level in Japan." Sony spent $61.4 million on the PlayStation brand in measured media in 2010, according to Kantar.

Howard Stringer, the chief executive of Sony Corp., added his own apology in a PlayStation blog letter to customers on Thursday, noting the promise of AllClearID Plus ' $1 million identity theft insurance per user. He also addressed the overwhelming criticism regarding the delay in notifying customers: "I know some believe we should have notified our customers earlier than we did. It's a fair question. As soon as we discovered the potential scope of the intrusion, we shut down the PlayStation Network and Qriocity services and hired some of the best technical experts in the field to determine what happened. I wish we could have gotten the answers we needed sooner. . . . It took some time for our experts to find those tracks and begin to identify what personal information had -- or had not -- been taken."

Sony portrayed itself as victim in several of its public notes, including a letter to Congress by Sony Computer Entertainment America chairman Kazuo Harai. He wrote: "Sony has been the victim of a very carefully planned, very professional, highly sophisticated criminal cyberattack designed to steal personal and credit card information for illegal purposes."

However, "Anonymous," the well-known hacking group that Sony has intimated might be responsible, denied responsibility for this hack and released a statement saying is not "engaged in credit card theft."

But will empathy, apologies, and freebies be enough?

"It's good that they've taken steps to offer something to their customer base," said Mike Mulvihill, president of public relations and marketing agency CRT/tanaka. "But I think they need to create a dialogue. They have approached this totally as a monologue and that doesn't work with Americans. They're going to have to step up and take some heat. Toyota found that out. It's not about being technically correct."

One survey by online couponing site CouponCodes4U queried more than 2,000 online users and found that 21% of those who said they own a PlayStation 3 would consider switching to Xbox 360 because of the outage and data breach. VentureBeat is running its own informal survey with roughly one-third of respondents agreeing that they would consider switching because of the outage, while other bloggers and social media posters are asking the same thing. Microsoft Xbox declined to comment and Nintendo Wii did not reply to questions about the potential to gain customers who might switch from PlayStation.

"There will definitely be some customers who are lost. . . . However, I would say it is nowhere near the 20% figure some surveys state," Mr. Moss said.

The PlayStation breach has raised issues about consumer confidence in networks and cloud computing in general, with pundits warning that the Sony breach could have a chilling effect on other services.

"This is about the credibility of the brand and right now that brand is saying hackers took us down catastrophically, and did so much damage that we can't even tell you how long it's going to take us to fix it. And these guys are the experts," Mr. Mulvihill said.

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