A History of Mastertronic
By Anthony Guter
is dedicated to the memory of Frank Herman, who died 30 March 2009.
|"Uncle" Frank Herman - the man who started it all.|
The business that became Mastertronic was started in London late in 1983 by four experienced businessmen:- Frank Herman, Martin Alper, Terry Medway and Alan Sharam. Unlike many of its competitors in the games software business, the company was not set up by programmers seeking an outlet for their creations, nor was it part of an established business with money to spare, dipping its corporate toe in the games industry's rising tide. As the business grew, Herman, Alper and Sharam gave up their other interests and committed themselves to succeeding as publishers by selling games as cheaply as possible. Other publishers seemed to be concerned only with the process of creating the software and marketing an image, a strategy aimed directly at the consumer, with the hope that customer demand would somehow bring the games into the shops. In contrast, Mastertronic aimed its strategy at the distributors and retailers. If the games could be put on the shelves then the low selling price would do the rest.
The core of the strategy was the idea of "budget" software - games priced at less than £3.00 at a time when most good sofware was £5.99 or more. In fact, Mastertronic went for £1.99 as the basic price.This is explained below. Within three years the company was the leading supplier of games software in the UK and selling all over the world.
Terry Medway (not at work)
The story of how the business began is not wholly clear and it rests on a couple of coincidences. Herman was the distributor for a line of American videos and knew enough about the duplication process to see how this could apply to computer tapes. Alper and Medway were running a video shop in the West End, Video Tapes International, (and they may have had other business interests, including a restaurant in which former champion boxer John Conteh was involved). Sharam was a partner in a surveyor’s practice, Hirshfields, based in George Street in London.
The first coincidence is that Alper and Medway's video shop was also in George Street and Hirshfields were the commercial managers of the building in which the video shop was located. The second is that Herman, who knew Alper and Medway through the video business (I assume he supplied them with product) also knew one of the partners in Hirshfields, Colin Gershinson. Herman and Gershinson had met not only through property deals but through charity work, in which Herman had an abiding interest, and had known each other for many years.
It is likely that it was Herman who thought that a cut-price games business could be commercially successful, got Alper and Medway enthused, and then had a word with Gershinson about finding a space for them to start up. (Gershinson has told me that he never knew Alper or Medway until Herman introduced them to him). This in turn involved Sharam who probably handled the arrangements for letting out a basement location in the George Street building that Hirshfields managed. But before that space was available it appears that games were being produced and sent over to Sharam's office - in Gershinson's words "I recall with Frank putting the tapes into boxes for shipment on various occasions". Ken Dye, Sharam's assistant (who worked for Mastertronic until the Sega takeover and then continued as stock controller with Sega) claims that the business actually started in the stationery cupboard at Hirshfields. It is likely that at this time the games were simply old stock purchased from other publishers and the customers a limited range of video shops.
Before this back office business could grow, it was necessary to move the product into a much wider range of shops. At this time one of Herman's key contacts in the video distribution business was Richard Bielby, ex-professional cricketer for Nottinghamshire. Bielby supported by his wife Alison, had a network of distributors who would take videos directly to local video shops, grocers, newsagents - any small business that wanted a sideline. The video rental business had also been through boom and bust and computer games seemed an ideal supplementary line. A meeting was convened at the Clifton Ford Hotel, just round the corner from George Street, at which the idea of Mastertronic was pitched to Bielby and his team. The enthusiasm was sufficient to launch the business. Gershinson and Medway put up enough money for licences to be bought, cover art designed, tapes duplicated and packed and the necessary overheads, including the creation of the distinctive Mastertronic logos and brand imaging. Sharam and Dye became involved in the logistical aspects and gradually committed to working full-time for Mastertronic. The company started trading on 1 April 1984. My involvement began in August 1985.
Why was it called Mastertronic? As part of a general marketing plan in which the word Master was going to be used with lots of other words. I think in the very early days it was intended to distribute various electrical products but only the computer games were successful.
The company briefly published records under the name Mastersound and videos as Mastervision. These were not particularly succesful ventures. They also used MasterAdventurer for those games that fell under the “adventure” category. This was partly due to early dealings with Carnell Software to publish an elaborate adventure game for the Spectrum called Wrath of Magra. Carnell Software was in financial difficulties and ceased trading in the summer of 1984. Two of their titles were republished, Volcanic Dungeon and Black Crystal.
The computer games market in the UK in 1983
The first computer games boom was based on the Atari consoles. This collapsed around 1982/3 but the new generation of cheap programmable computers was emerging. This was led in the UK by Sinclair products (the ZX80 / 81/ Spectrum range) with fierce competition from Commodore’s Vic and C64. The retail end was poorly organised. Console games had been sold by a variety of outlets typically electrical stores, photographic shops and some of the high street chains. These pulled out of the market. Mail order was popular for consumers living away from town centres. But in a town centre where did one go for a computer game? There were virtually no specialist games shops. Were games toys, or published products like books and records, or did they rightly belong with consumer electronics alongside the computers on which they ran? There was no obvious answer to this question.
Mastertronic was started by men who understood distribution and marketing. They knew nothing about computer games and were proud to boast1 that they never played them (but this is no different to the heads of large record companies who never hear the music of their stars). When programmers came in with demos, someone would have to setup the machines, load the games and even plug in the joysticks for the directors. Mastertronic never employed programmers directly (unlike Virgin Games who at the time of the merger had a programming staff of 6, with several others on special projects). Everything was bought in from outside, either directly from the authors or from other games publishers. Once established, the company was deluged with games from enthusiastic amateurs and managed to publish quite a few of them.
Before the company started trading, the business strategy had been defined. The separate elements were each vital to success. These were distribution, sourcing and pricing.
Mastertronic's founders had backgrounds in video distribution,
another boom/bust trade and used their contacts to set up distribution
to retailers. At the beginning the high street chains were not interested.
But because the games were cheap it was easy to persuade small retailers
to take them. Richard Bielby has said that there was a "gentleman's
agreement" between himself and Frank for Richard to handle all
the independent retailers - it would be typical of Herman that such
an understanding was informal and based on a handshake - and he and
his wife kept in touch with dozens of shops and traders, bought in bulk
from Mastertronic and broke the stock into manageable units for their
sub-distributors and merchandisers. Many had experience of the video
distribution business, now rapidly consolidating as big high street
operators took over. They were glad to switch to computer games which
were, as Bielby says "... a nice extra line to sell during the
quieter summer months".
Although most of the employees in the Paul Street warehouse
were casual labourers, to take on the overheads of a warehouse was a
bold step, one which very few publishers would ever do. But for Mastertronic,
the key was to keep promises about delivery. No publisher working through
a wholesaler could guarantee when products would be issued. A customer
buying from Mastertronic could, if he wished, go to the warehouse and
collect his goods there and then. Running the warehouse kept the directors
in touch with the physical side of the business. They were forced to
understand how to pack games, what sorts of packaging broke in transit,
what sort of labelling was required by retailers, and every aspect of
Sourcing the product
Because Mastertronic was a publisher not a software
house its first big problem was to find the product. One important source
was Mr. Chip, a software house run by Doug Braisby. (The business still
exists and is now called Magnetic Fields). The games he sourced sold
395,000 copies in the first 15 months of Mastertronic's life (to June
1985). But this achievement was eclipsed by another key source, the
brothers David and Richard Darling, themselves destined to become major
players in the industry. They had their own publishing company, Galactic
Software. Having mastered the art of quickly developing games for the
Vic and C64, the Darlings set up a partnership with Mastertronic which
gave them both a royalty and a share of the profits on the sales of
their games. Some of the Galactic back catalogue was republished alongside
newly-written games. The partnership was astonishingly successful. In
that hectic first 15 months nearly 750,000 games written by the Darlings
were sold, netting them some £85000. Professional programmers
would have been glad of such sales. For two boys of school age this
was evidence that games were likely to be better than education and
as soon as they could the Darlings left school, terminated the deal
with Mastertronic and set up a new company, Codemasters.
In 1983-4 most computer games retailed in the UK at prices between £4.99 and £7.99. Retailers disliked cheaper games because they made less profit and the public were suspicious of the quality of “budget” games (quite rightly so in the majority of cases). Mastertronic games were priced at £1.99. How could they do it?
At that time all computer games in the UK and Europe were distributed on cassette tape, similar to that used for musical recordings. Computers using floppy disks were available, most notably the C64 and the models aimed at business, such as the Apple, Commodore Pet and Tandy ranges. But these were mainly sold in the US. In Europe the cheaper tape-based models had the overwhelming part of the games market. Games were short, reflecting the limited memory capacities of the computers. The largest was the C64, with its supposed 64000 bytes of memory. In fact the amount available to run programs was about 38000 bytes, the rest being used by the computer for internal operations. Computer code that filled this space fitted onto a short length of tape that could load in about 5 minutes. For a reasonable print run, a tape duplicator could produce copies for about 25 pence each. Inlay cards cost about 3 pence each. The artwork cost anything up to £1000; assuming a print run of 20,000 this reduced to 5p per unit. Other distribution costs might add 5 pence in total.
The principal supply of duplicated tapes was an Essex-based firm called Peakmyth. It was originally a video duplicator and Herman knew its owner, Mike Dawson. Dawson's own words tell the story, and provide further illustration of the casual but warm and personal way that Herman did business.
The close relationship with Peakmyth, and with other duplicators later, meant that Mastertronic bought its tapes at 22 pence.
Budget pricing was proved to be perfectly viable provided that most titles achieved good sales, and in the fast growing market of 1984–6, at the “pocket-money” price point of £1.99, they did.
The company matures
Rapid growth required more staff and the development of internal systems for accounting, sales, stock control and royalties. The company left George Street for a flat overlooking Regent’s Park in a block everyone called Park Lawn (it was actually named Park Lorne). By now there was a games buyer, John Maxwell, with two assistants and some PR, accounting and secretarial staff.
Terry Medway ceased to be actively involved at this time, according to Colin Gershinson, though he remained as a director of Mastertronic Ltd until 1987. Gershinson himself played no part in the management of the business, other than attend some board meetings. I was Company Secretary from late 1985 onwards and never met either Medway or Gershinson. Board meetings, with Herman as chairman,were about as casual as it is possible for such events to be.
Alison Beasley, who was the PR person and general assistant at the time, has told me that the Darlings rented the flat above and she lived there for a while. The boys would come up from school to spend weekends writing games
I joined in August 1985 as Financial Controller. I had to put in financial systems and replace a useless computer system with something suitable for such a fast-growing business. Because the company relied on outside sourcing for all product, I was scrupulous about keeping good records and paying royalties promptly (four times a year). This was one of my key responsibilities. It also brought me into contact with many of the programmers.
Park Lorne was too small and in September 1985 Mastertronic found new offices in Paul Street (where the warehouse was situated). The company stayed there until merging with Virgin Games in September 1988.
New models of computers began complicating the business, because it now had to consider whether it was worth making conversions of existing hits and what to do about new games. The more types of computer, the less shelf space available for each individual format in the shops so that in a way this reduced the choice of games. The Amstrad, C16, MSX and Atari computers all became established in this year. Few competitors took much notice of the C16 and for a while Mastertronic was the only company with a range of games for this machine. Each title sold in huge quantities. For example Squirm on the C64 sold 41,000 but a year later the C16 version sold 82,000
In late 1985 the launch of the MAD label was the first, deliberate, step away from the "pure budget" game. MAD was an acronym of "Mastertronic Added Dimension". The new label was launched with a party on a boat on the Thames where the authors demonstrated the first games in the range -The Last V8, Master Of Magic, Spellbound and Hero Of The Golden Talisman
The MAD launch was an exception to the policy of not spending a lot on marketing. Competitors spent plenty on advertising, mainly in magazines.Mastertronic rarely advertised. This probably reduced the amount of editorial coverage about the company and “puffs” for forthcoming releases but there were fair reviews once games were released. The press had been fairly contemptuous at first. In 1985 there was a grudging acceptance that some budget games were good value for money (for the traditional view see this snippet about Action Biker) and some as good as any full price product, and the dismissive attitudes gave way to a "How can they do it at the price?" admiration. In 1986 Mastertronic became “cool”.
The company began to be deluged with games, game ideas and propositions. Sample tapes arrived daily and were placed in the "magic postbox" for evaluation. People would walk in off the street and if their work impressed they could be offered a contract there and then. I once overheard Frank Herman asking a hopeful programmer if he had an Amiga. When the kid said he did not, Frank told him to take a spare one from the testing area4. The popular TV show "Jim'll fix it" featured the creation of a game for a youngster. This was marketed as Supertrolley and featured a cover with a cartoon Jimmy Savile.
Some programmers visited us regularly. I enjoyed meeting guys like David Jones (Magic Knight series), Clive Brooker (Empire strikes back, One Man & His Droid, Lap of the Gods), Kevin Green (Skyjet, Flash Gordon, Space Hunter) and Jim Ferrari (King Tut, Human Race, Hollywood or Bust). Now and then Rob Hubbard would pop in to hand over his latest tune. We even had the odd visit from the shaggy-haired boss of Llamasoft, Jeff Minter, several of whose titles we republished.
Several programmers worked for the company for a while as technical advisors - Stephen Curtis (Nonterraqueous, Soul of a Robot, Into Oblivion) Richard Aplin (Destructo, Fly Spy, Ultimate Combat Mission) Tony Takoushi (Frenesis, Hyperforce and a journalist for magazines such as The Games Machine).
In 1986 the business outgrew the little warehouse in Paul Street. Distribution was outsourced to a packaging company in Dagenham, confusingly called Masterpack5. Mastertronic soon became the biggest customer of Masterpack and eventually had its own dedicated warehouse on the site. In this the company continued to be different to nearly all of its competitors who relied upon wholesalers to stock and distribute their product.
The early success of the first batch of games in the UK encouraged Mastertronic to exhibit at the summer CES show in Chicago in 1984. A partnership with Classic Family Entertainment, based in California, created a joint venture called Mastertronic Inc. Although the man named as president, Sidney Niekerk, had links to Herman's video business (and therefore they presumably knew each other well) the joint venture did not last very long because in 1985 Mastertronic Inc, commenced production of disk-based software at a facility in Frederick, Maryland.This company was owned 80% by Mastertronic and 20% by the owner of the factory, Gary Snyder6. A few pictures of the company's production facility are available here.
In 1986 Martin Alper, who had the most marketing flair, moved to California and established the software design and sourcing arm of the business in Costa Mesa, in the suburbs of Los Angeles, though production continued in Maryland for many years. Mastertronic Inc could only distribute C64 games at the start because all the other 8 bit computers were virtually unknown in the USA. Gradually Alper introduced games for the new 16 bit machines and Mastertronic Inc began to take on a different profile to the UK based business. Links with US software houses provided a new source of games and the label “Entertainment USA” was created to showcase these in Europe. This was balanced by another label, Bulldog ("Best of British"), which took its name from a customer (a subsidary of Melbourne House) acquired when they were on the verge of going bust.
Herman also found exclusive distributors in the major European markets and thus created the impression of a truly international group. Mastertronic SA and Mastertronic GmbH were formed in France and Germany respectively, Mastertronic owning 51% of the shares in each with the local distributor keeping 49%. (The registration of the name in France faced obstruction from the literal minded authorities who protested that the word was neither a real name nor that of a product and was therefore unacceptable). Oddly, the men running the three main European distributors were all British; Cameron MacSween in France, John Kellas in Germany and John Holder in Italy (This latter was never owned by Mastertronic). Personal relationships struck at computer shows brought these arrangements into being.
The UK company was now managed by Herman, whilst Sharam increasingly specialised in sales and logistics (warehousing, packaging, controlling production schedules).
In the late summer of 1986, Mastertronic recruited Geoff Heath as Director of Marketing. Geoff had run both Activision and latterly Melbourne House. He was a heavyweight in the games industry and his appointment marked a step up in Mastertronic's internal development. His long term target was to bring the company into full price software.
16 bit computers became popular and for the first time the quality of games for the home machines, such as the Amiga and Atari ST, seemed similar to those in arcade machines. The 16 bit range was launched, somewhat belatedly, on a new label called 16-Blitz although the name was not used for very long. There was even a range of games for the IBM PC and its many clones; using these machines for games was commonplace in the USA but a novelty in the UK.
Mastertronic Inc began to develop a range of new arcade games that would run equally well on home computers. The company agreed to buy a large number of Amiga chips from Commodore to power the new arcade machines. This venture, called Arcadia, nearly killed the company because the project developed slowly and the games were poor quality and not well suited for arcades. This demonstrated a weakness in the setup - any games player could have explained that a home computer game is fundamentally different in design to an arcade game. But nobody asked games players. However, the name Arcadia was used in the USA in preference to Melbourne House. The flourishing state of the Amiga market meant that Commodore did not enforce the contract, fortunately.
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.
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 project. 7 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 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 –
Frank Herman, in early 1987, spotted that Sega had no UK distributor for the Master System range, because Ariolasoft had failed to impress the Japanese-based group. He applied and Mastertronic were appointed distributor for one year. Martin Corrall, who was somewhat at a loose end after the absorption of Melbourne House, was the ideal manager for this new line of business. The company sold all it could get that year, the UK distributorship was renewed and in addition within two years were appointed as distributors in France and Germany, and thus was born the huge business that was to become Sega Europe. In 1991 the group turnover was around £100 million, a phenomenal growth. Nearly all of the sales, and certainly all of the profit, came from Sega products. Staff numbers soared but the traditional games publishing side began to be neglected. Full price games such as Golden Axe and Supremacy were achieving significant results and making the budget business seem irrelevant.
In early 1991 Sega expressed interest in taking over the business. Virgin Group was happy to sell. Sega had no interest in the games publishing side. As a result nearly all the staff moved over to Sega when they bought the business that summer and only a handful of Virgin games programmers stayed with the publishing side (quickly renamed Virgin Interactive Entertainment. By that time the budget business was dying and nobody cared about it. In any case the competition had become intense as everyone was now recycling their old full price games as budget games. And of course the kids who used to buy C64s and Spectrums were now buying Segas and Nintendos.
After the Sega takeover Frank Herman became deputy Managing Director of Sega Europe (with Nick Alexander as MD) and Alan Sharam was Managing Director of Sega UK. Martin Alper stayed with Virgin and continued to head up VIE for several years, remaining resident in the US. And I also moved to Sega where I became European IT Manager.
VIE rebranded its budget range under the "Tronix" label, possibly because the legal rights to the name Mastertronic remained with Sega Europe. Sometime around 1992-3 VIE pulled out of budget games altogether. It is still possible to buy original Mastertronic tapes because large quantities of unsold games came back from the retailers and some are still being sold today. Somehow the name continues to bring back memories. There must be many thousands of kids who could not afford the more expensive games and who were able to enjoy gaming thanks to Mastertronic. The business really was unique - it could not be replicated today. Games are now developed by teams of programmers and designers and typical retail prices are £30 - £45. The days when a teenager could walk unannounced into an office, load up a tape and instantly be offered a publishing deal have gone. But there was really a time when this happened. It is beginning to feel like a legendary era but it was only twenty years ago8.
In August 2003 Mastertronic was reborn. The name was used to launch a new range of budget games, all of which had previously done well as full price titles. Frank Herman joined them in March 2004, resuming his old position as Chairman. There was no relation between the new company and the old, other than the name. Sadly it all came to an end in 2015 when the new Mastertronic, in financial difficulties for over a year, went into administration.
Last major revisions: June 2016
There are also many references to the development of the company's business, image and corporate structure in the sections Style and Press.
I have tried to make this as impersonal as possible but inevitably my own experiences form part of the story.
© Anthony Guter - April 2004 and updated
2012 and 2016.