A History of Mastertronic
By Anthony Guter
Anyone wishing to use this material may do so freely. Please let me know if you do
This history is dedicated to the memory of Frank Herman, who died 30 March 2009
Mastertronic was founded in 1983 by three experienced businesmen Martin Alper, Frank Herman and Alan Sharam. Based in London, they had some financial backing from a small outside group of investors. Unlike many of our 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. Mastertronic’s founders 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. I will explain how this worked later on. The founders believed it possible to build up a reasonable market share from their experience in video distribution, in which both Frank and Martin had been active. Alan was a partner in a surveyor’s practice, Hirshfields, in London and was introduced to Frank and Martin by one of his partners. The business began in the back room at Alan’s office in George St, in the heart of the West End. (According to Ken Dye, who worked for Alan at Hirshfields, followed him to Mastertronic and remained for many years with Sega UK as stock controller, it actually started in the stationery cupboard). 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.
We briefly published records under the name Mastersound and videos as Mastervision. These were not particularly succesful ventures. We 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. We republished two of their earlier releases, 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 boast 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 we merged had a programming staff of 6). Everything was bought in from outside, either directly from the authors or from other games publishers. Once established, we were 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. Mastertronic set up a network of self-employed distributors,
with some knowledge of merchandising, to reach outlets that the mainstream
wholesalers missed. A key figure in setting up these networks was
Richard Bielby, ex- professional cricketer with Nottinghamshire. Bielby 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
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 we 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. Mastertronic,
aiming for large product runs, bought its tapes at 22 pence (some assistance
was gained in the directors having part ownership of the tape duplicator).
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.
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.
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 we relied on outside sourcing for all our games, we were 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 our warehouse was situated). We stayed there until merging with Virgin Games in September 1988.
New models of computers began complicating the business, because we 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 of our competitors took much notice of the C16 and for a while we were 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 we launched the MAD label, this stood for 'Mastertronic's Added Dimension' and was the first, deliberate, step away from the "pure budget" game. MAD games retailed at £2.99 and were intended to be better quality. The range 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 our policy of not spending a lot on marketing. Our competitors spent plenty on advertising, mainly in magazines. We rarely advertised. This probably reduced the amount of editorial coverage about the company and “puffs” for forthcoming releases but I think we got fair reviews once games were released. The press had been fairly contemptuous of us at first. In 1985 there was a grudging acceptance that budget games were at least value for money and some as good as any full price product. In 1986 Mastertronic became “cool”.
We 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 we liked what they had we would sign them up 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 our own testing area. The popular TV show "Jim'll fix it" featured us creating 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 one, Jeff Minter himself.
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).
In 1986 the business outgrew the little warehouse in Paul Street. We outsourced distribution to a packaging company in Dagenham, confusingly called Masterpack (I can’t remember if this name was just co-incidence or if the packaging company renamed itself when it got our business). We soon became the biggest customer of Masterpack and eventually had our own dedicated warehouse on the site. In this we continued to be different to nearly all of our competitors who relied upon wholesalers to stock and distribute their product.
Software had been sold in the USA from the beginning by a local distributor. In 1986 Martin Alper, who had the most marketing flair, went to California to set up Mastertronic Inc. This company could only distribute C64 games at the start because all the other 8 bit computers were virtually unknown in the USA. Gradually Martin 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 one of our customers who we acquired when they were on the verge of going bust.
We also found exclusive distributors in the major European markets and thus created the impression of a truly international group. In France and Germany we formed Mastertronic SA and Mastertronic GmbH, owning 51% of the shares in each with the local distributor keeping 49%. (When we tried to register the name in France we 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.).
The UK company was now managed by Frank Herman, whilst Alan Sharam increasingly specialised in sales and logistics (warehousing, packaging, controlling production schedules).
Around the late summer of 1986, we 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 us 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, appropriately enough, on a new label called 16-Blitz although the name was not used for very long.
Mastertronic Inc began to develop a range of new arcade games that would run equally well on home computers. We 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 our 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.
Dominance in UK distribution
The success of the budget range and the growing influence of Mastertronic led to us 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 us rerelease their older product at a budget price and of course this was easy business for us. The "Richochet" label was born, featuring in particular games from Activision Martech and US Gold. We also created a special label, Rackit/Rebound for Hewson. I doubt if acting as a wholesaler was really in our best interests - it was very distracting and time-consuming for all the staff, quite expensive because we had to a lot of special packaging, and led to a neglect of the budget business.
We had always steered clear of full-price software but changed direction radically in 1987. Mastertronic bought the famous UK publisher Melbourne House, when that company was struggling with financial problems, from its Australian holding company Beam Software. 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.This move meant that we 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, a market from which Mastertronic had previously excluded itself, and in particular as a sales outlet for the home version of arcade games. I disagreed with the purchase because we could have easily launched our label with the £850,000 purchase price (although legal disputes about work in progress meant that we only paid over part of the price).
Virgin buys in
In 1987, following negotiations between Herman and Richard Branson, Virgin Group purchased the 45% of shares held by the outside investment group. 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 we left Paul Street and joined forces with the Virgin Games staff in their mews offices in a side turning off Portobello Road in London’s Notting Hill. This signalled the beginning of the end of the key Mastertronic budget business. Virgin were not really interested in it – they wanted our 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. (I do not have equivalent figures for USA sales by Mastertronic Inc). We peaked in 1986 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. We applied and 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. We sold all we could get that year, the UK distributorship was renewed and in addition we 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 (probably to raise cash for the airline). 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 became deputy Managing Director of Sega Europe and Alan was Managing Director of Sega UK. Martin 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.
Sometime around 1992-3 VIE pulled out of budget games altogether and the Mastertronic name disappeared from view. 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 ago.
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. My ex-boss Frank Herman joined them in March 2004, resuming his old position as Chairman. There is no relation between the new company and the old, other than the name, but I will keep a friendly eye on them anyway.
© Anthony Guter - April 2004 and updated 2012