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The government did not negotiate nor was the government a target. A private company was hacked. That private company made a corporate decision to not release this film. The Obama administration made no decision nor did they tell Sony what to do.

Sony likely felt that the threat of violence would keep people from going to see the movie. Some theaters had already cancelled screenings.

Should the investigation by the several governmental agencies involved unequivocally point to N Korea as the source of this cyber attack, then and only then, there will be a proportional response.

The best known cyber attack which was directed at Iran, was produced by the US and Israel to cripple Iran's nuclear program. While I agree with the goal, it is best to understand that the US cannot with a straight face claim that a cyber attack is equivalent to an act of war requiring a military response unless you feel that Iran would be justified in attacking US interests and in fact that their failure to militarily respond to our cyber attack is appeasement and shows the cowardice of their leadership. Or maybe Iran did this and is making it look like it came from North Korea.