And yet, the Obama administration has options to stifle the shakedown, if it chooses to exercise them.
After hacking Sony's (SNE) computer network and subjecting its employees to identity theft and public embarrassment, North Korean hackers threatened theater chains with a Sept. 11, 2001-like attack if they showed "The Interview," a satirical comedy about a plot to assassinate Kim Jong Un.
Sony, unable to find theaters, pay television or digital platforms to show the movie, was forced to cancel its Dec. 25 release. And Hollywood studios have now shelved at least one other project that might offend North Korea.
For months, the Obama administration has been aware of the movie and warned Sony that North Korea might attempt to shake down U.S. targets, but it did little to protect the studio or theater chains.
U.S. policy on cyberattacks is to protect private-sector assets vital to U.S. infrastructure -- for example, banking, the Internet and the power grid -- but the administration has repeatedly failed to act effectively when other private businesses and citizens are threatened.
For example, the Chinese government and army have hacked U.S. firms, seeking to steal vital corporate secrets, but the best that the Obama administration has come up with is protests and criminal indictments of Chinese military officials, which are meaningless if they don't travel to the United States.
Washington could mount counterattacks. However, the Obama administration's response, whether regarding China's bullying of U.S. allies in the China Sea or its harboring North Korean hackers operating within its borders, has been to plead for relief and to seek new areas of cooperation with China in the spheres of economics and defense that could one day reduce America to Beijing's client state.
Now, no one should be surprised that North Korea has concluded that it can destroy Sony's internal communication system, subject its employees to peril and bully all of Hollywood at whim.
And U.S. businesses must now reckon with the fact that rogue foreign governments will steal and exploit their intellectual property, unless they pay tribute.
Granted, national and local law enforcement officials may not be able to secure thousands of theaters across the country on Dec. 25.
However, instead of remaining silent as Sony was abandoned by movie distributors, the Obama administration could work with the large theater chains to protect marquee venues in major cities for the movie's release. And Obama could set an example by personally attending the New York debut and sending his cabinet members to screenings around the country.
Obama could host a command performance, inviting prominent Americans, and let Sony post a for-pay link to the movie on the White House website.
Although North Korea has a military cybercommand composed of about 3,000 people, its Internet infrastructure is limited, and U.S. options for imposing comparable disruption on its businesses and society through cyberretaliation are equally limited.
North Korea is already the target of economic sanctions, and U.S. options to isolate it further are virtually nil.
Instead, Washington could use its cybercapability, for example, to shut down Pyongyang's power grid. And if Washington can't accomplish that, it could resort to punitive military strikes to damage important economic assets and impose maximum pain.
In any case, the damage inflicted on North Korea should be much more than proportionate. It should be many times larger and more devastating to deter other attacks by hostile governments.
Instead, Obama criticizes Sony for bending to foreign censorship, when it is his job to defend Americans from foreign aggression.
Americans are now forced to worry about what they write in the newspaper, post on the Internet or even say publicly for fear of offending foreign powers and attracting personal attacks that could ruin their finances and reputations.
Those are simply not acceptable violations of personal liberty on American soil by a foreign power -- and all because Obama simply lacks the courage to defend us.
This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.