Hollywood Targeted by Chinese Hackers

6:00 AM PST 03/07/2013 by Tim Appelo
Tomi Um
Chinese hackers illustration

At least one Burbank studio has been hacked, experts say, and piracy is rampant in "a culture of copying."

This story first appeared in the March 15 issue of The Hollywood Reporter magazine.

Have Chinese hackers invaded Hollywood's computers, as they have the systems of Facebook, Apple, The New York Times and more than 100 other major Western entities? While some studio sources say no, cybersecurity experts tell THR another story.

"Yes, absolutely," says cyber-espionage expert Dmitri Alperovitch, former vp threat research at McAfee and co-founder of CrowdStrike. "I know of major Hollywood studios that have worked on distribution rights and other negotiations with Chinese companies and have been hacked before those negotiations had been completed because the Chinese wanted their negotiation playbook. The other side knows exactly what they're planning to do and will cheat and get their way in the negotiation."

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Says RAND Corp. senior management scientist Martin Libicki: "It's a shame that they cheat, and it'll bite 'em on the butt in some ways. But if you have information of interest to the Chinese People's Liberation Army, and it's connected to the Internet, they probably have it already. It's like a former FBI guy says, 'There are two types of organizations: those who have been hacked and those who have been hacked and don't know it.' "

Says James Fallows, National Book Award-winning author of National Defense and a New York Emmy winner for hosting Doing Business in China: "There is military hacking. There is corporate espionage. There are 'unruly youth' -- the kind of people who in other countries would be tagging buildings with graffiti. In China right now, they're hacking into the Pentagon."

And hacking into Hollywood. "I know of several incidents, especially within the last year, where a pretty large studio in Burbank has had a lot of their intellectual property pretty much lifted," says a consultant at Element Digital Security Services. "It's pretty hard to combat. Say it's a secretary or somebody working in HR: When they click on a link in a bogus email message, it'll generate an attack payload and give the attacker control of the desktop. So they've bypassed millions of dollars' worth in firewalls and other perimeter controls."

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Besides using such spearphishing tactics, potential Chinese partners of American businesses have used proof-of-concept presentations as a ruse to reverse-engineer technology cheaply and hacked into laptops of business partners. "I knew a lot of guys at Qualcomm­ that tried to do deals in China, and as soon as you plugged into the network, they had a Tiger Team break into your laptop and steal all of your stuff," says the consultant.

The root of the problem lies in China's contempt for intellectual property. Most video and software consumed in China is pirated, and it is widely rumored that the People's Liberation Army runs the trade. In his new book China Airborne, Fallows calls China "a culture of copying." The idea of a global free market enriching all is not what businesspeople there are after. "Everyone is grabbing everything they can," a top Chinese professor told Fallows.

"Copying is more taken for granted among companies -- much like any country during its period of rapid catch-up development," Fallows says, citing Britain's bitter grousing about American intellectual theft in the 1700s and 1800s.

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The difference between the U.S. in 1700 and China in 2013 is that China has bigger plans and a quicker timeline. The Chinese Academy of Sciences predicted in January that its economy would overtake the U.S. by 2049, and building an entertainment industry is part of that plan. "They're building eight [theater] screens a week," says Mark Gill, president of Millennium Films. To stay on schedule, China will need a few pages from the Hollywood playbook.

"It's a lot easier to steal than to build," says Alperovitch. "The Chinese have mastered that art in cyberspace perfectly."

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