Sony said it would resume some services on its PlayStation Network this week and offer incentives to customers to try to prevent them turning to competitors after the theft of personal information belonging to 78 million user accounts.
Top Sony executives apologized for the massive data breach at a news conference in Tokyo Sunday, the first public comments from senior management on the crisis.
We apologize deeply for causing great unease and trouble to our users, Kazuo Hirai, Sony's No. 2 and the front-runner to succeed CEO Howard Stringer, said, bowing deeply three times during a lengthy news conference. Stringer was not at the event.
Many PlayStation users around the world had been angered by the fact that the first warning of one of the largest Internet security break-ins ever came a week after Sony detected a problem with the network on April 19.
The warning that user credit-card information might have been stolen also came just hours after Sony unveiled its first tablet computers at an event where executives made no mention of the PlayStation breach.
Sunday's news sparked thousands of comments on the official PlayStation fan page on Facebook, some of them from users who said they would switch to Microsoft's Xbox Live games network.
Sony said it would offer some free content, including 30 days of free membership to a premium service to existing users and in some regions pay credit card-renewal fees.
It said compensation would only be paid if users suffered damage. Sony did not elaborate except to say there was no evidence that credit card details had actually been stolen. It has confirmed the theft of names and addresses.
They have got to come back online -- the online element is so critical, said MKM partners analyst Eric Handler.
Although he added that Sony users are still spooked and concerned. It's going to take time, he said.
Since the breach, security has been boosted on Sony's computer systems, the company said, adding that enhanced levels of data protection and encryption would be implemented. The U.S. Federal Bureau of Investigation had been asked to probe the breach, Sony said.
The negative impact on Sony is likely to be short-term, but the industry as a whole will suffer a longer-term impact, said Kazutaka Oshima, president of Rakuten Investment Management.
I think it will impact Amazon and other e-commerce businesses. Sony might have had some security problems but I don't think they had a particularly big hole.
Peppered with questions about accusations Sony was slow to inform users of the intrusion, a grim-faced Hirai said the company first wanted to know what kind of information had been stolen.
Hirai said he had known about the infiltration when he unveiled Sony's first tablet computers on April 26.
We made the announcement as soon as we could, which turned out to be the day after the launch, said Hirai, Sony's executive deputy president.
The breach could be a major setback for Sony. Although video game hardware and software sales have declined globally, the PlayStation Network is a key initiative for the electronics company, which one analyst estimates brings in around $500 million in annual revenue.
Hirai said Sony could not yet assess the impact on earnings, but at this point saw no effect on the launch timing for its new hand-held games device or its tablets.
This criminal act against our network had a significant impact not only on our consumers but our entire industry. These illegal attacks obviously highlight the widespread problem with cyber-security, Hirai said in a separate statement.
In addition, the organization has worked around the clock to bring these services back on line and are doing so only after we had verified increased levels of security across our networks.
The incident has sparked legal action and investigations by authorities in North America and Europe, home to almost 90 percent of the users of the network, which enables gamers to download software and compete with other members.
Sony shares tumbled 4.5 percent Thursday. Markets were closed Friday.
It is unclear whether Hirai's explanation will persuade users that the network is safe and investors that Sony's strategy of exploiting synergies between hardware and content via online services, which he has expanded to include movies and music, is manageable.
There seems to be a little too much emphasis on how bad the hackers were, and a little too little emphasis on Sony's role in allowing this to happen in the first place, said Michael Pachter, an analyst at Wedbush Securities.
I find the lack of commentary on how the breach occurred troubling, he said.
Hirai told the news conference that Sony would continue to build its network-related businesses as a key strategy for the company. Hirai was appointed to the No. 2 position in March after spearheading the development of networked businesses.
Sony is the latest Japanese company to come under fire for not disclosing bad news quickly.
Tokyo Electric Power Co was criticized for how it handled the nuclear crisis after the March 11 earthquake. Last year, Toyota Motor Corp was slammed for being less than forthright about problems over a massive vehicle recall.
(Additional reporting by Taiga Uranaka, Chikako Mogi and Mari Saito; Jennifer Saba in New York; Editing by Nathan Layne, Dean Yates and Maureen Bavdek)