A History Of Mastertronic

Dominance in UK distribution

The success of the budget range and the growing influence of Mastertronic led to the company becoming the main supplier of both budget and full price software to a number of major retailers in the UK, notably Toys’R’Us and Woolworths. Some full price publishers were happy to let Mastertronic rerelease their older product at a budget price and of course this was easy business. The Richochet label was born, featuring in particular games from Activision and Martech. Two special labels, Rackit/Rebound and Americana were created for Hewson and for US Gold respectively. US Gold soon after created their own budget label, Kixx, run by John Mearman (who had owned the Bulldog distribution business and who became Mastertronic sales manager after the company was taken over). Acting as a wholesaler may not have been in best interests of the business – it was very distracting and time-consuming for all the staff, quite expensive because it required special packaging, and contributed to a neglect of the budget business.

Melbourne House

Mastertronic had always steered clear of publishing full-price software but changed direction radically in 1987. Herman did a deal with Fred Milgrom, whose Australia-based Beam Software owned the famous UK publisher Melbourne House, when that company was struggling with financial problems. Melbourne House kept its label identity and a few of the staff joined the Mastertronic team, notably Rachel Davies the marketing manager, and general manager Martin Corrall. Ironically, they were reunited with their old boss, Geoff Heath, who had left hurriedly only a few months earlier.This move meant that Mastertronic had first refusal on re-releases of games such as The Hobbit, Lord of the Rings and The Way Of The Exploding Fist. However the main justification for the purchase was to provide a vehicle for the sale of full price games and, in particular, as a sales outlet for the home version of arcade games produced by the Arcadia project7. There were supposed to be a large number of titles in production, by Beam Software or by UK freelancers, from which the purchase price would be recouped; several were deemed unsuitable for release and sales figures for those that did complete were very disappointing, A legal dispute with Beam Software resulted in a substantial reduction of the purchase price, £850,000 originally; cannily, Herman had agreed to pay it in instalments as a means of protection.

Virgin buys in

In 1987, following negotiations between Herman and Richard Branson, Virgin Group purchased the 45% of shares held by the outside investors. In that year Mastertronic’s turnover was about £8 million and pre-tax profit £1 million. The deal valued the group at around £10 million. The remaining 55% was held by Alper (25%), Herman (20%) and Sharam (10%) and they sold out in 1988 in a highly complex deal which required their continuing involvement in the business and achievement of profit and cashflow targets. The company was renamed the Mastertronic Group Ltd, and later was merged with Virgin Games to create Virgin Mastertronic.

In September 1988 Mastertronic left Paul Street and its staff joined forces with Virgin Games in their mews offices in Vernon Yard, a side turning off Portobello Road in London’s highly fashionable Notting Hill. This signalled the beginning of the end of the key Mastertronic budget business. Virgin were not really interested in it – they wanted the Sega franchise (see below).

The entrance to Vernon Yard as it is now.

The decline and fall of the budget empire


The graph shows the volume of budget games sold in the UK and European markets between 1984 and 1990. The seasons run from July to June, except 1984/5 which begins in April 1984. (Equivalent figures for USA sales by Mastertronic Inc are not available). The peak was in 1987 and then sales declined almost as fast as they grew. The number of titles released actually increased in 1987/8 so the unit sales per title were falling rapidly, eroding the profitability of the business to the point that there seemed no point in continuing.

The decline had several reasons –

  • new competition in the budget market from companies like Codemasters and from full price publishers like US Gold releasing their own budget labels
  • The growing market for 16 bit computers. There was a range of budget games for these but there was never the same buoyancy in this market. Perhaps people felt that having bought a more expensive computer they should only buy more expensive games
  • Loss of interest by the management of Mastertronic – the absorption of Melbourne House and the merger with Virgin took up huge amounts of management time (including my own). There was almost nobody to take an active interest in the budget business, even though this was the cash cow that made everything else possible.
  • Declining quality of budget games – this is a personal view. The company had begun to rely heavily on a few software houses – such as Binary Design, Icon Design, Palmer Acoustics – and less on individuals. Large advances were paid to the software houses (in some cases for games they never delivered) and there was less money available to pay to solo programmers. The high pressure on the software houses to deliver batches of titles on time to meet Mastertronic’s commitments to its retail customers tended toward formulaic and highly derivative games. These in turn did not impress the ultimate consumers and the reputation of Mastertronic declined.
  • The revival of the games console market, spearheaded by the Nintendo Famicom and Sega Master System. Fortunately this was one development that Mastertronic was heavily involved in.

continues…

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1 Comment

  1. Neil from the RetroManCave/Retro Collective on Youtube now owns the Mastertronic trademark and is planning to release a load of budget games using it. Its mentioned on their latest update video.

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