DigiCube declares bankruptcy

TOKYO--According to Bloomberg Japan, Square Enix subsidiary DigiCube declared bankruptcy in Tokyo district court today. The company made the decision after deciding total liabilities exceeded its capacity to repay debts. The company owes 9.5 billion yen ($87 million).

DigiCube, which based its operations on distributing games in convenience stores, was established by Square in 1996. With its operations based in Japan, the company suffered from shrinking games sales and reduced demand for its wireless-delivered content services. While DigiCube recorded sales of 8.6 million copies of games in 1998, that figures dropped to 2.4 million by 2002. The company took a loss of 6 billion yen ($65 million) in 2001 from the dissolution of its convenience store-based kiosk business.

Oddly enough, parent company Square Enix may well have played a role in DigiCube's failure. The CEO of the bankrupt company told reporters today that the delay of FFXII was a major factor in DigiCube's decision to close its doors. The company's revenue for the past quarter was approximately 10 billion yen ($92 million), but early projections based on the assumption that FFXII would ship during the quarter called for revenue of 21 billion yen: more than twice the actual receipts.

DigiCube reported a loss of 1.1 billion yen ($10 million) during the first half of this fiscal year, and said it expected to end the fiscal year with a 2.7 billion ($28 million) deficit.