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Retrospective: Mastertronic

June 27th, 2016 by

1983. Programmable home computers were emerging and the computer games retail market was poorly organised to say the least. The major high street stores like Boots, WH Smith and Woolworths etc. wouldn’t touch it. How could it be categorised? Were computer games toys, or published material like Books or recorded media like music Records, or were they consumer electronics?

Toys, Books and Records were very tactile. Customers could fondle these little beauties before deciding to purchase or not. Computer games on the other hand were a different kettle of fish. How could it be possible to stock Cassette Tapes where customers could load them into a computer, wait 5 minutes or so for it to load, then play for 10 minutes before deciding not to purchase? Staff would need training because of the very technical nature of the product and to top it all games publishers, on the most part, were fly by night, one hit wonders. Retailers were suspicious. There’s just no profit in Computer Software.

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Mastertronic to the rescue
Mastertronic persuaded newsagents, sweetshops and garages, video shops and groceries, even motorway service stations to take “dealer packs”, 100 games at a time mounted on cardboard racks. They were asked just to give the products some space. Sale or return agreements meant traders undertook no risk.

One important source for Mastertronic’s games were the brothers David and Richard Darling (name ring any bells?). Setting up a partnership with Mastertronic gave them both a royalty and a share of the profits on the sales of their games. 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. (2 points if you knew already)

Boring bit about maths
In 1983-4 most computer games retailed in the UK at prices between £4.99 and £7.99. Mastertronic games were priced at £1.99. How could they do it?

Well, computer game code 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. 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.

So a game could be duplicated and put out to market for a total cost of some 35 pence. The other main cost was the software itself. Games could be purchased outright but most authors wanted royalties, not wishing to lose out in case of success. The standard deal offered in 1984 was an advance of £2000 and a royalty rate of 10 pence a unit. Many young authors were very happy to take this, especially when Mastertronic went on to sell 50,000 copies or more.

In later years royalty deals moved closer to the standards in book publishing with royalties based on a percentage of receipts, but in 1984 this would have made no difference, all games were sold at the same price anyway.

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A bit more about the math
Having set the costs, the profit depended on the wholesale price. Here the calculations work backwards. From a retail price of £1.99, VAT (15% at the time) took 26p. Retailers expected to make a margin of 30%. They would therefore not buy at prices higher than about £1.30. Between this price and the production cost of 45 pence was a margin wide enough to cover advertising, overheads, the profits of distributors and (provided there were not too many), the costs of failed titles. In practice Mastertronic sold to distributors at about 90 pence a unit, reduced to around 80 pence in the more competitive late 80s, and at about £1.30 when able to distribute directly to retailers.

This pricing structure would generate good profits provided sales were high enough. If the total sales of a title were just 10,000 units then raw material and distribution cost might be £3000, artwork and advance to author a further £2500 and the receipts about £9000. So this would bring a reasonable gross margin of 38%. But in the early days they easily exceeded 10,000 units per title. The 10 C64 titles released at the start of Mastertronic’s life sold on average40,000 in the first year and over 50,000 before being withdrawn from sale. The Vic titles achieved 44,000. Surprisingly the early Spectrum releases did less well but still averaged 28,000.

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. (boring bit over)

M.A.D
In late 1985 Mastertronic launched the M.A.D label ‘Mastertronic’s Added Dimension’ and was the first, deliberate, step away from the “pure budget” game. M.A.D 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 their first games in the range -The Last V8, Master Of Magic, Spellbound and Hero Of The Golden Talisman.

Programmers 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), Jim Ferrari (King Tut, Human Race, Hollywood or Bust) became part of Mastertronics regulars. Rob Hubbard would pop in to hand over his latest tune, even the shaggy-haired one, Jeff Minter himself climbed on board. Several programmers worked for the company in-house 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) to name a few.

Mastertronic Inc.
In 1986 Martin Alper set up Mastertronic Inc in the states. 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 Mastertronic acquired when Bulldog were on the verge of going bust. Exclusive distributors in the major European markets thus created the impression of a truly international group. In France and Germany Mastertronic SA and Mastertronic GmbH.

Around 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 Mastertronic 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. Mastertronic 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 Mastertronics 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.

The success of the budget range and the growing influence of Mastertronic led to them 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 re-release their older product at a budget price and of course this was easy business. The “Ricochet” label was born, featuring in particular games from Activision Martech and US Gold. Mastertronic also created a special label, Rackit/Rebound for Hewson.

Melbourne House
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 they 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.

Master 003

Virgin
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 Mastertronic joined forces with the Virgin Games staff in their mews offices 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 Mastertronics Sega franchise…

Sega
Frank Herman, in early 1987, spotted that Sega had no UK distributor for the Master System range. They Were applied and 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. They sold all they could get that year, the UK distributorship was renewed and in addition they 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. Anthony Guter moved to Sega where he 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 five years ago.

 

Mastertronic Group
After a ten year silence 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 is no relation between the new company and the old, other than the name.

The group has also purchased the low-cost software distributor ‘Sold Out’. The label has been retained, and is (as it was previously) being used to sell software at the £5 (frequently “3-for-£10″) price-point. The company is also distributing software under the old ‘M.A.D.’ imprint, as well as another label associated with PC Gamer magazine. Games on these labels are being sold for £10 (or “3-for-£20″). Mastertronic started the Great Indie Games publishing label, to spread independent games only available on the internet.

This Community Content article was submitted by Wind Junky, a member of our community, utilising content from Anthony Guter’s Mastertronic Site which contains a fuller in-depth history of the game publisher.

Community Content is your way of getting long-form writing and opinion out to the Midlife Gamer audience, an open platform to get something off your chest. For full guidelines on our editorial standards and how to create your own post, click here. The views expressed within are those of the author and not necessarily the opinions of the Midlife Gamer Staff

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