MediaDefender Leak Cost: Nearly 1 Million Dollars
November 20, 2007
The prolific P2P news website P2P Blog.com
is running an interesting article regarding MediaDefender and September's massive security leak. As many will remember, MediaDefender suffered a humiliating attack in from a group named MediaDefender Defenders, which claimed responsibility for the massive information leak.
The information leak was divulged in three components. The first and perhaps most damaging was the 6 months worth of personal and business emails, coupled with an extensive phone conversation between MediaDefender and a law enforcement official. Both provided substantial insight into the company's operation. This was followed by the MediaDefender loosing the confidentiality of its source code to its anti piarcy tools. Finally, a database containing the hash codes to fake files on the Gnutella network was leaked. Each one was highly damaging in its own way, however today there's an actual number: $825,000.
P2P Blog discovered this number from MediaDefender's SEC filing
. These regular financial documents are submitted regularly, which permits company transparency for investors. According to MediaDefender, their cost as a result of the attack was attributable to "service credits" and "legal, consulting and other direct costs."
"As a result of this development, MediaDefender recorded approximately $600,000 for service credits to customers, which were recorded as a reduction to revenues during the three months ended September 30, 2007. This amount was determined based on various factors, including discussions with customers, and is subject to adjustment in future periods based on additional information. MediaDefender also recorded approximately $225,000 of legal, consulting and other direct costs related to the breach during the three months ended September 30, 2007."
The service credits were dedicated to maintaining MediaDefender's 4 customers who make up 66% of their business. That's an incredible investment, which basically holds off losing their core customers for the near term. If MediaDefender suffers another attack, they may find it difficult to maintain their customer base with service credits.
MediaDefender still managed $5,938,000 net revenue for the third quarter, however this was down from $6,393,000 in September of 2006.
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