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A cyber-invasion brought Sony Pictures to its knees and terrified corporate America. The story of what really happened—and why Sony should have seen it coming. A special three-part investigation.

Part 1: Who was manning the ramparts at Sony Pictures?

On Monday, Nov. 3, 2014, a four-man team from Norse Corp., a small “threat-intelligence” firm based in Silicon Valley, arrived early for an 11:30 a.m. meeting on the studio lot of Sony Pictures Entertainment, in the Los Angeles suburb of Culver City. They were scheduled to see Sony’s top cybersecurity managers to pitch Norse’s services in defending the studio against hackers, who had been plaguing Sony for years.

After a quick security check at the front gate and then proceeding to the George Burns Building on the east side of the Sony lot, the Norse group walked straight into the unlocked first-floor offices of the information security department, marked with a small sign reading info sec. There was no receptionist or security guard to check who they were; in fact, there was no one in sight at all. The room contained cubicles with unattended computers providing access to Sony’s international data network.

The visitors found their way to a small sitting area outside the office of Jason Spaltro, Sony’s senior vice president for information security, settled in, and waited. Alone. For about 15 minutes.

“I got a little shocked,” says Tommy Stiansen, Norse’s co-founder and chief technology officer. “Their Info Sec was empty, and all their screens were logged in. Basically the janitor can walk straight into their Info Sec department.” Adds Mickey Shapiro, a veteran entertainment attorney who helped set up the meeting and was present that day: “If we were bad guys, we could have done something horrible.”



Finally Spaltro, who’s worked at Sony SNE since 1998, showed up and led them to a nearby conference room, where another studio information security executive was waiting. The meeting began, and as Stiansen described how Norse scopes out potential threats, Spaltro interrupted: “Boy, that could really help us with that North Korean film!” According to the four Norse representatives, Spaltro explained that he was worried about a Seth Rogen comedy called The Interview that the studio was preparing to release on Christmas Day. It featured a plot to assassinate Kim Jong-un, the country’s actual leader. Recalls Stiansen: “They said North Korea is threatening them.” (Sony denies any mention of a North Korean cyberthreat.)

After about an hour the Sony team declared the session “very productive,” according to the Norse team, and promised to be in touch. They departed, leaving the visitors to find their own way out.

Three weeks later—starting at about 7 a.m. Pacific time on Monday, Nov. 24—a crushing cyberattack was launched on Sony Pictures. Employees logging on to its network were met with the sound of gunfire, scrolling threats, and the menacing image of a fiery skeleton looming over the tiny zombified heads of the studio’s top two executives.

Before Sony’s IT staff could pull the plug, the hackers’ malware had leaped from machine to machine throughout the lot and across continents, wiping out half of Sony’s global network. It erased everything stored on 3,262 of the company’s 6,797 personal computers and 837 of its 1,555 servers. To make sure nothing could be recovered, the attackers had even added a little extra poison: a special deleting algorithm that overwrote the data seven different ways. When that was done, the code zapped each computer’s startup software, rendering the machines brain-dead.

From the moment the malware was launched—months after the hackers first broke in—it took just one hour to throw Sony Pictures back into the era of the Betamax. The studio was reduced to using fax machines, communicating through posted messages, and paying its 7,000 employees with paper checks.

That was only the beginning of Sony’s horror story. Before destroying the company’s data, the hackers had stolen it. Over the next three weeks they dumped nine batches of confidential files onto public file-sharing sites: everything from unfinished movie scripts and mortifying emails to salary lists and more than 47,000 Social Security numbers. Five Sony films, four of them unreleased, were leaked to piracy websites for free viewing. Then the hackers threatened a 9/11-style attack against theaters, prompting Sony to abandon The Interview’s Christmas release. A week later, after an uproar, the studio announced it would make the movie available, after all, through video on demand and in a few hundred theaters.

On Dec. 19 the FBI blamed the hack on North Korea, which had issued threats over the film. The White House followed with economic sanctions. Sony was pilloried both for horrendous judgment (for making a comedy depicting the killing of North Korea’s sovereign leader) and its seeming capitulation (for its initial refusal to show the film). In its darkest hours Sony drew zero support from Hollywood—and a blast from President Obama. Sony’s traumatized employees face an ongoing threat of identity theft.

The studio and its Tokyo-based parent, Sony Corp., were already under siege. “Big Sony”—as studio executives refer to it—is facing a prolonged crisis after losing money for six of the past seven years. Sony Pictures remains one of its few moneymaking businesses. But as interviews and internal emails reveal, the studio was a deeply unhappy place, beset by pressures over disappointing profits, cost cutting and layoffs, the scorn of an activist investor, and tribal infighting. Sony Pictures CEO Michael Lynton pursued four separate opportunities to leave the company during the 18 months before the hack.

In Sony’s view, the company is a blameless victim. In a December interview with National Public Radio, Lynton insisted his company was “extremely well prepared for conventional cybersecurity,” but faced “the worst cyberattack in U.S. history.” He has repeatedly described it as a “highly sophisticated attack.” Sony Pictures provided written responses to questions through Robert Lawson, its chief spokesman. He says Lynton has no plans to fire or discipline anyone. The CEO’s reasoning rests on the belief that because Sony’s assailant was a foreign government, with far more resources than a renegade band of hackers, what happened was unstoppable. The studio simply faced an unfair fight.

In a statement, Lawson argues that “any suggestion Sony Pictures Entertainment should have been able to defend itself against this attack is deeply flawed and ignores essential findings and comments made by the FBI and [Sony’s cybersecurity consultant] Kevin Mandia—the two parties most knowledgeable of the nation state threat and the evidence in this investigation. Joseph Demarest, then assistant director of the FBI’s cyber division, could not have been clearer when he told a U.S. Senate hearing that ‘the malware that was used would have slipped, probably would have gotten past 90% of the net defenses that are out there today in private industry, and I would challenge to even say government.’ ” Mandia, the statement continues, “has also explained how the sophistication of the exfiltration methods used in this attack made them virtually undetectable. And both Mandia and the FBI have stated that the malware used was undetectable by industry standard antivirus software.”

In truth, there is no way to know whether Sony’s attackers would have prevailed over even impeccable cyberdefenses. Experts say Sony’s electronic security probably wasn’t worse than that of many others; weak, outmoded practices are the norm at far too many companies. But it’s clear that Sony, which failed to employ several basic safeguards, didn’t put up much of a fight.

As it was, the company had ample reason to have bolstered its defenses: For years, culminating with its release of The Interview, Sony Corp.’s business decisions have made it a virtual piñata for cyberassailants. And North Korea had been blamed for devastating high-profile electronic attacks in the past. Despite that, the company’s leadership failed repeatedly to take greater precautions.

“No company is ever going to say, ‘We were just sloppy, so people got in,’ ” says cybersecurity expert James Lewis, senior fellow at the Center for Strategic and International Studies. “The fact that it’s a nation-state and is hard to defeat doesn’t mean you have to leave the doors wide open and put out the welcome mat.”



This article is based on more than 50 interviews with current and former high-level executives at Sony (all of whom insisted on not being identified by name), cybersecurity experts, and law-enforcement officials. It is also based, in large part, on Sony emails and documents stolen by the hackers. Beyond generating Hollywood gossip, which they already have, they offer a remarkable window into the business of Sony Pictures at the time of the hack: the personalities of its leaders, the pressures they faced in their relationship with the business’s Tokyo-based parent, and the challenges of running an entertainment studio in the 21st century. (We’ve preserved the emails’ original punctuation and often sloppy spelling.)

The emails also reveal myriad surprises and previously unreported anecdotes, including one episode in which Sony spied on its own employees’ emails. Paradoxically, the hacked emails and documents provide a telling window into how and why such a disastrous hack succeeded and what companies need to do to protect themselves—which is precisely why Fortune has chosen to use this material. (For more on our thinking, see Editor’s Desk here.)

What happened at Sony stands as a landmark event. It struck terror in boardrooms throughout corporate America, and for all the unique elements in Sony’s situation, the lessons apply to every company. After all, to use an old line, there are only two kinds of companies: Those that have been hacked, and those that don’t yet realize they’ve been hacked. Countless behemoths have been victimized on a massive scale, including Target TGT , Anthem WLP , Home Depot HD , and J.P. Morgan JPM , suffering incursions for profit-oriented data theft or corporate espionage.

The peril for corporate America seems to be growing even faster than the immense resources now mobilized to combat electronic crime. (The government has hardly been immune, with high-profile infiltrations of the IRS, the White House’s email system, and the U.S. Office of Personnel Management.) But for the most part, previous corporate invasions have afflicted customers, not businesses. This one hit home because it showed how attackers could steal even executives’ most precious secrets—and bring a company to its knees.

Sony, Kazuo Hirai Sony Corp. CEO Kazuo Hirai tried to shake the company from its “crisis.”Photograph by Ethan Miller—Getty Images

The Humbled Giant

The improbable combination of a Japanese electronics giant and a Hollywood studio dates back to 1989. Sony Corp. was then the most dominant electronics company on the face of the earth, at a moment when Japanese business dominance seemed permanent. Sony paid an eye-popping $4.8 billion for struggling Columbia Pictures, declaring movies the equivalent of “software” needed to boost sales of its premium “hardware”—TVs, videocassette recorders, and music players. The studio was renamed Sony Pictures Entertainment but continued to struggle, forcing a $2.7 billion write-down five years later.

The next quarter-century was not kind to Sony Corp., which clung to its consumer electronics business as it became commoditized. Today the company remains a Goliath, with 132,000 employees and $74.7 billion in revenues for the fiscal year ending in March. But Sony has lost $12.1 billion over the past seven fiscal years. When Kazuo Hirai became CEO in April 2012, he declared “a very severe sense of crisis” and announced a turnaround strategy, including thousands of layoffs. In the change-averse Japanese corporate culture, it has unfolded far too slowly.

Hirai, who succeeded Howard Stringer, Sony’s first non-Japanese CEO and a man frustrated by his inability to reenergize the sclerotic company, rose through its PlayStation videogames division, which he helped make a reliable moneymaker. Just 51 when named CEO, Hirai dressed casually, encouraged employees to call him Kaz, and, after years in the U.S., pitched products in perfect English.

Like his predecessors, Hirai kept his hands off Sony Pictures, run for more than a decade through a delicate yin-yang partnership. Sony’s studio chief was Amy Pascal, who reigned as the most powerful woman in Hollywood. Masterly at stroking celebrity egos, Pascal cultivated relationships with filmmakers and stars, who returned the affection. “I adore you, Amy,” George Clooney wrote her last year. “You are literally the only person running a studio that loves film.” Raised middle class in Los Angeles, Pascal was frenetic, thin-skinned, and unfiltered, given to long, stream-of-consciousness emails. Paid $9.1 million for 2014, she proudly presided over her domain from a majestic office once occupied by Louis B. Mayer. She had a reputation for dispensing overly generous deals and falling in love with ambitious movies that had dubious commercial prospects.

To inject fiscal discipline, Stringer in 2004 had forced Pascal to team up with Lynton, who had left a job as head of AOL Europe to join Sony Pictures as CEO. Raised in the Netherlands by a wealthy German-Jewish family that fled Hitler, Lynton attended Exeter before earning his undergraduate degree and MBA at Harvard, where he played rugby; he’d done a stint as an investment banker. Cool, cerebral, and measured, Lynton was an East Coast intellectual with artistic interests that he viewed as more refined than the crassly commercial fare typically peddled by Hollywood. In 1998, after leaving Disney Studios DIS and moving back east to run Penguin Books, he told a New Yorker writer of his “horror” at “living in a town where everything is about movies.”

A consummate networker, Lynton avoided drama and the spotlight, preferring to pull strings behind the scenes. He arranged a film audition for billionaire Leon Black’s actress-niece, dined with President Obama on Martha’s Vineyard, and plotted with Facebook FB COO Sheryl Sandberg to see if they could find a blind date for Malcolm Gladwell, one of his many writer buddies.

Despite his personal wealth (which included 2013 Sony pay of $9.6 million), Lynton made a show of being frugal. He drove a Volkswagen Golf GTI. Pascal described him in one leaked email as “the kind of guy who wears the same pair of shoes every day but what you wouldn’t know is that they were made by the poshest most expensive cobbler in switzerland.”

Lynton and Pascal had survived together for a decade—an eternity in Hollywood. Both in their mid-fifties, they lived two miles apart and even attended the same synagogue. When Lynton first took the job, he diplomatically vowed to steer clear of Pascal’s turf and rarely stood in the way of a film she wanted—even one he loathed—where the bottom line seemed to make sense. After reading the script for a movie called Money Monster, for example, he wrote Pascal: “I hate it … It is simplistic, bombastic, wrongheaded, and stupid. All that being said … if the numbers work and there is no risk then I am ok.” Sony moved forward with the film; its release date is undetermined. (Says Sony spokesperson Lawson: “Initially [Lynton] was not supportive, but what you don’t see in the stolen emails is that through further discussion, his position changed and he ended up supporting the project.”)

Hirai maintained a similar posture. In June 2014, after forwarding enthusiastic European screening reports for the Cameron Diaz comedy Sex Tape (which would later bomb), Lynton joked with the Sony Corp. CEO about their mutual dislike for it. “Something tells me that I should keep my day job,” wrote Hirai.

“The box office will be the judge,” Lynton replied. “But you and I have the same view of the movie!!”

Sony, Michael Lynton, Amy Pascal Sony Pictures CEO Michael Lynton and studio chief Amy Pascal, photographed in Sony’s lot in 2010, were emotional opposites but collaborated productively for a decade.Photograph by Robert Gallagher—Corbis/Outline

Fending off Dan Loeb: “No cost is too sacred to cut.”

In May 2013 a new consideration altered “Big Sony’s” dealings with the studio and shook its fragile management partnership: The parent company came under pressure from Dan Loeb. Loeb, who runs the New York City–based hedge fund Third Point, had acquired a $1.1 billion stake in Sony Corp.—more than 6% of its Tokyo shares—and placed Sony Pictures in his crosshairs.

Loeb is rough on his targets, often accusing executives of personal misconduct in an attempt to drive them out. In a letter he urged Sony Corp.’s board to spin off up to 20% of the studio (as well as its music business, which Lynton also oversees) through a public offering to help fund its turnaround. Loeb publicly charged that Sony Pictures was “famously bloated” and “poorly managed,” with profit margins far below those of rival studios. Hirai, he asserted, was giving Lynton and Pascal “free passes.”

The movie business is volatile. But in truth the studio was not only experiencing a bad run but also poorly positioned for the future. Its two pricey would-be summer blockbusters for 2013, White House Down and After Earth, flopped. Sony’s pipeline was short on “tentpoles,” the big franchises that generate lucrative sequels and tie-in products, such as action figures and videogames. The studio produced few animated hits for the family market. And too many of its movies had limited appeal overseas, now two-thirds of total box-office receipts.

Still, Hirai had no intention of doing what Loeb wanted. Despite its problems, the movie studio, with about 11% of the parent’s revenues, remained one of Sony Corp.’s few profitable realms. A spin-off would also undermine Hirai’s “One Sony” strategy—his revived notion of the old software-hardware synergy.

What followed was a strange form of misdirection. Although many at Sony feared and loathed Loeb (an executive vice president, in a leaked email, called him a “douchebag”), the company’s chiefs launched a public charm offensive in hopes of persuading him to walk away. Hirai had breakfast with Loeb in Tokyo. Lynton and Pascal hired a new $600,000-a-year studio PR chief, Charlie Sipkins, from a crisis-management firm where he’d helped Yahoo deal with Loeb successfully. And Sony announced it was responding to Loeb’s calls for increased transparency with its first-ever “Entertainment Investor Day,” to be held on Nov. 21, 2013.

Executives prepared for this event, which was to be webcast, as if it were Oscar night. Pascal drafted her presentation three weeks early, then emailed Lynton and others: “LET’S START REHEARSING NOW.” When Loeb, during a CNBC interview, expressed pleasure with promised Sony actions, company executives tweaked their scripts to highlight those steps. PR man Sipkins even sent everyone an email on preferred attire: “We want to project a consistent image … men should wear dark suits, nonpatterned shirts, and simple ties. If possible, women should wear suits or long skirts/dresses.”

SONY_profits

In five hours of presentations Sony executives labored to display their commitment to fiscal discipline and consistent earnings. Lynton and Pascal promised tighter policies for green-lighting films. Talent would get less generous deals, more dependent on financial results. Sony was reducing its annual slate from two dozen movies to 18. And the studio vowed to slash $250 million in expenses over the next two years, a process that would result in hundreds of layoffs. “No cost is too sacred to cut,” Lynton declared.

By then Lynton had hired management consultants Bain & Co. to find at least another $50 million in cuts, for a total of $300 million. Sony labored to “spin” this bloodletting, privately instructing the executive team, according to hacked meeting minutes: “Going forward, everyone should use the name ‘Build for Tomorrow’ when referring to the project … the process can be enormously productive, and we need everyone to embrace it wholeheartedly.” But Bain’s hiring leaked into the press before Sony even announced it internally. This, TV chief Steve Mosko complained to Sony’s CFO, had generated “a major shit storm … I had people in my office all day yesterday asking if they were losing their job.”

Yet it appeared to have the desired effect on Loeb. In January 2014 he emailed Hirai and Lynton that he’d fed friendly comments about the company to the New York Post. “Hope they were helpful,” he said. When Variety called him for a story, Loeb gave Sony executives a heads-up. “I’m talking on background only,” he confided. (Loeb declined to speak with Fortune.)

Still, Nicole Seligman, Sony Corp.’s New York–based general counsel was wary, according to leaked emails. Was a mole inside Sony talking to Loeb? She decided to find out. At her direction the studio’s top lawyer, Leah Weil, secretly arranged for the IT department to unearth all email traffic between Loeb and anyone at Sony since January 2013, then forwarded the messages to Seligman. The search turned up just a dozen innocuous exchanges between Loeb and two Sony executives, Lynton and Mosko, who had already told Seligman about them.

“Nothing new,” Seligman wrote Weil in a confidential email. “Should not be shared beyond you.”

“Understood,” Weil replied.

SON.07.01.Sony.Part A.05
Photo: Lynn Goldsmith—Corbis

“Why is everyone freaking out … what is the big deal?”

The fallout from Loeb’s campaign caused widespread unhappiness at Sony Pictures. At Investor Day, with flat profits projected for the movie business, Lynton promised “a significant shift in emphasis” to the studio’s real moneymaker: television. Driven by hits like Breaking Bad and Blacklist, syndication, and a growing portfolio of overseas channels, TV was already producing more than half the studio’s operating profit. Sony was projecting that figure to climb to 75% by 2018.

Pascal was beside herself at the resulting coverage in the trade press, according to leaked emails: that TV was now paramount, that her job was in jeopardy, and—in a Hollywood Reporter story—that she had only recently parted ways with a personal assistant paid “well over” $250,000 a year. (Actually, it was $300,000.) “This is truely the most ridiculous inaccurate article I have ever read” … “absurd” … “so stupid” … “insane,” she vented in a series of emails to Sony executives, industry friends, and family. “I dont get whats going on,” she wrote Lynton. “Why is everyone freaking out … what is the big deal?”

“Because we said no cost is too small,” shot back Lynton. “An assistant paid that amount suggests a lack of controls. We claim to have those controls.”

“Michael all the stories are about how we are concentraing on tv and how you have ultimate greenlight authoruty … it was two fucking movies … how long does this go on?”

“Until we can show a real turn around or they focus on the next studio,” Lynton replied.

The executives running television, who reported to Pascal, also felt maligned. Mosko, a yoga-practicing fitness buff who had been at Sony for two decades and rebuilt its TV business, accused Pascal and Lynton of supporting a “personal attack” in the media on him and his group. In a February email to Pascal, he wrote, “I’ve always delivered for you guys … and getting thrown under the bus and treated like the help … it’s fucked up.” Mosko vented to Lynton, too, after the CEO scolded him about startup costs for new shows. “I feel a ton of hostility coming my way and I’m not sure why … every year we find a way to deliver … and then some …”



In late summer Lynton even came to suspect the TV chief was attempting a power play. “Steve Mosko is actively campaigning to be made COO of SPE,” he advised Seligman, then vacationing in Prague. “Steve/COO? Oy,” she replied.

Lynton, facing growing pressure to boost profits, wasn’t happy either. “Work has been very taxing lately,” he confided to a friend in November 2013. “All a bit more than I signed up for, but I will persist …”

After a decade as CEO and uncertain of his future after the departure of Stringer (who had hired him), Lynton had already begun exploring opportunities to leave. In early 2013 he had two conversations with Time Warner CEO Jeff Bewkes about running the Warner Bros. studio. Then, in October 2013, Ilene Nagel, a Russell Reynolds headhunter advising Tulane University on its search for a new president, contacted Lynton about the job. Although Lynton lacked a Ph.D. and had never been an academic, he agreed to fly to New Orleans to meet with the search committee. Before that could happen, Nagel informed Lynton that Tulane had canceled after deciding that his lack of traditional credentials would make it a “challenge for you to gain acceptance.”

By then Lynton was pursuing a third position: as secretary of the Smithsonian Institution, its top management job. Lynton met with Smithsonian board members on Jan. 8, and Nagel emailed him a “hugely confidential smiley” the next day.

“Wow. Great news!” Lynton replied.

“Mum’s the word,” she advised.

Once again, though, it didn’t work out. In February he got word from Nagel that the board had “opted for the more traditional candidate.”

In his most concerted effort to leave, Lynton spent more than a year pursuing the presidency of New York University, being vacated in 2016, when Lynton’s Sony contract was up. In November 2013, after a meeting with John Paulson, a hedge fund billionaire on the NYU board, Lynton agreed to submit a letter promoting his candidacy. With editing suggestions from relatives and friends—including New Yorker writer Gladwell—he drafted a three-page pitch in December. “While I may not at first glance be a logical candidate to be the next president of NYU, I think that on closer inspection my qualifications for the position are excellent … ” Lynton wrote. He touted his experience “managing disruptive, egotistical, and difficult personalities who are very talented, driven, innovative, and stubborn. It is not that very different from the academic environment of a university.”

Lynton would continue to campaign for the position during 2014. In August he met with attorney Marty Lipton, NYU’s board chairman, who bluntly advised him that he was a “long shot.” Lynton didn’t take the hint, telling Lipton he would still “very much like to put my name forward for the position.” In September, Lynton met with billionaire Ken Langone, another member of the search committee.

Meanwhile the pressures at Sony Pictures intensified. Sony was counting on big box-office numbers from the latest installment of Spider-Man, its biggest franchise, whose previous four films had grossed a combined $3.25 billion. (Lynton invited Loeb to the New York premiere but instructed his staff to make sure that the investor’s seats be “nowhere near Amy or me.”) But at $709 million in worldwide ticket sales, Amazing Spider-Man 2 disappointed; Sony had projected $865 million. An outright flop came two months later, with the comedy Sex Tape. “I think it kills the year,” Lynton emailed Pascal, as the depressing results arrived. “ We keep putting our heads in the sand. I fear that this may just be one too many.”

Seth Rogen, Evan Goldberg, The Interview, Sony Seth Rogen and his collaborator, Evan Goldberg, whose hits have included Pineapple Express and This Is the End.Photograph by Xavi Torrent—WireImage/Getty Images

“Totally floored by this movie. And by you.”

Even as Sony’s film business struggled through another rocky year, Pascal hoped her skill at building relationships with emerging stars would help turn things around. Seth Rogen was perhaps her favorite.

Rogen and his collaborator Evan Goldberg had been making profitable movies with Sony since 2007, starting with Superbad, which they had written as teenagers in Canada. The pair’s hits included Pineapple Express and This Is the End. By early 2014, Pascal was working to line up Rogen for three more Sony projects. The Interview, which Rogen and Goldberg had directed and already filmed, was set for wide release on Oct. 10, 2014.

Rogen didn’t always plan a comedy about a plot to kill the actual ruler of North Korea. Early scripts employed a fictional character named Kim Il-hwan, according to Interview screenwriter Dan Sterling. He maintains it was a studio executive (he declined to give the person’s name) who originally suggested using Kim. Rogen and Goldberg loved the idea. Unlike, say, China, an important film market and thus one Sony didn’t want to alienate, North Korea was regarded as fair game for provocative material in Hollywood. Pascal and Lynton blessed this change.

In hindsight it’s easy to second-guess this decision. North Korea is a rogue state (with nuclear missiles) led by a volatile, unpredictable dictator. “Why is it necessary to name Kim Jong-un?” a filmmaker who has worked with Sony asks Fortune. “Is it going to mean that much more at the box office? If you’re doing a serious film it’s one thing. But it’s a fart movie!”

The plot of The Interview is now well known. A doltish tabloid talk-show host played by James Franco and his bosom-buddy producer (Rogen) are invited to North Korea to interview Kim Jong-un, who’s a secret fan of their program. The CIA then enlists the pair to assassinate Kim. Some laughs ensue. It all ends with Kim’s fiery death in a helicopter, which Franco’s and Rogen’s characters gun down from a commandeered tank.

The Interview cost $44 million to make ($8.2 million went to Rogen) and had a $32 million marketing budget. Sony had hefty box-office expectations for the R-rated comedy: $100 million to $135 million. The movie featured tigers, military hardware, and expensive special effects. Even Rogen marveled at the latitude he’d enjoyed, telling Rolling Stone before its release, “They’re giving us insane amounts of money to do whatever the fuck we want.”

Given the pair’s commercial success, Sony was deeply motivated to keep Rogen and Goldberg happy and on the studio lot, where they worked out of a suite of offices and strolled the grounds smoking weed. “We love your movies and frankly yours is the most important relationship we have,” Dwight Caines, Sony’s president of theatrical marketing, told Rogen in an email. Test screenings for The Interview were strong. “Totally floored by this movie. And by you,” Pascal wrote Rogen and his team in April. “Thanks for letting us make it,” Rogen replied. “Nobody else would do that.”

Rogen and his collaborators seem to have genuinely wanted to make a statement about the loony and oppressive ways of the Kim regime. “I was thrilled by the opportunity to make a mass appeal studio movie with a bit of political commentary in between the dick jokes,” says Sterling. Sony executives seemed onboard. “The movie is doing something bold that I’m not sure any other movie has done before—taking on as its subject matter a real persona of this notoriety,” Caines wrote Rogen in May. “This is the kind of angle that makes this notable … fun with a dash of smarts.”

Click here to read part 2.

Click here to read part 3.

A version of this article appears in the July 1, 2015 issue of Fortune magazine.

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