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Mastertronic was originally a publisher and distributor of low-cost computer game software founded in 1983. Their first games were distributed in mid-1984. At its peak the label was the dominant software publisher in the UK, a position achieved by selling cassette-based software at the GB£1.99 and £2.99 price-points. As well as being an exclusive wholesaler of computer games to Woolworth's, Toys "R" Us and other leading retailers, Mastertronic sold software in outlets such as newsagents which had not been previously associated with the software market.
Later diversification included the setting up of US operations to source and distribute their software, as well as an unsuccessful arcade games division (Arcadia Systems). However, it was their decision to market the Sega Master System in the UK that ultimately proved most successful. It resulted in the Master System outselling its rival, the NES throughout the 8-bit era and was cited by some as Virgin Group's reason for investing in the company (and later buying it outright).
As the budget software market declined, the Sega hardware distribution became the dominant part of the business, and the company was eventually merged into Sega itself. Although the original company no longer exists, the rights to the name were acquired by another company, Mastertronic Group, formed as a result of a merger of The Producers and Sold Out Sales & Marketing in 2006.
In 1983 Martin Alper, Frank Herman, Terry Medway and Alan Sharam founded the computer game publishing company Mastertronic. The four had some financial backing from a small group of outside investors and previous experience in video distribution. Their initial venture involved bundling packages of 100 tapes ("dealer packs") and sending them to news agents, toy shops, motorway service stations, or just about anyone who would take them. At that time (1984) mainstream retailers generally refused to take the risk on budget games because of poor quality and sales. Mastertronic eventually won them over with a regular supply of good quality and high selling games. Another key figure at the time was ex-Notts Cricket batsman Richard Bielby who ran a distribution network servicing a large number of small retailers.
New labels, expansion and diversification
In late 1985 Mastertronic launched their M.A.D ("Mastertronic's Added Dimension") label. This meant that they could sell games at a slightly higher price (£2.99). The first ever M.A.D. game was 'The Last V8' and many more were soon to follow.
Martin Alper, who had the most marketing flair, went to the USA in 1986 to set up Mastertronic Inc. The UK company was managed by Frank Herman, whilst Alan Sharam increasingly specialised in sales and logistics (warehousing, packaging, controlling production schedules). As the business continued to grow Mastertronic created another label in 1986 - 'Entertainment USA', when it began working closely with several American writers, including Sculptured Software and Randall Masteller. They wanted an outlet to sell games to the UK market, and so Mastertronic moved in, often using Rob Hubbard or David Whittaker to re-do the music. Soon afterwards, this name was used by Woolworths as the new name for their wholesale business.
In 1987 Mastertronic decided to expand their distribution of software and began exporting titles back across the Atlantic, so the label "Bulldog" was created primarily to distribute the 'Best of British' games in the US (The name Bulldog actually came from a small wholesaler called Bulldog Distribution who got into financial difficulties and was taken over the previous year). Several other labels were invented for other publishers who wanted them to re-issue their old full price product at budget prices, such as Rack-it for Hewson and Americana for U.S. Gold. However by this time the market for budget games had begun to decline sharply. A typical game might sell 50,000 units in 1986, but only 15,000 in 1988 and 5,000 in 1990. This was the impact of more competitors in the budget market, with many companies dumping their previously full-price product at the cheaper price point.
Mastertronic bought out Melbourne House when that label was struggling with financial problems (Melbourne House kept its label identity) - this also meant that they had first refusal on re-releases of games such as The Way of the Exploding Fist. And so their re-release label 'Ricochet' was born. They pulled off a few major re-releases at £1.99, most notably Crazy Comets and Impossible Mission.
Arcadia Systems 
During the late 1980s, Mastertronic started a venture to develop arcade games under the name Arcadia. The intent was that the hardware would be based around the chipset from Commodore's Amiga computers, and that the same game could run on both Arcadia hardware and home systems, reducing development cost.
However, Arcadia was a failure; according to Mastertronic's then financial controller, Anthony Guter, the games were of poor quality and not suited to arcade style play. Guter noted that while those within Mastertronic who played games were aware of the difference in style between arcade and home games, the directors in charge of the company were not. According to Guter, Arcadia's failure nearly bankrupted the company.
Merger with Virgin Interactive
Having bought Melbourne House and with heavy financial commitments to the Arcadia project Mastertronic itself was now suffering severe cash flow problems. Virgin stepped in and Richard Branson purchased the 45% of shares held by the outside investment group. The remaining 55% was held by Alper (25%), Herman (20%) and Sharam (10%) until 1988 when they sold out in a highly complex deal which required their continuing involvement in the business and achievement of profit and cash flow targets. The company was renamed the 'Mastertronic Group Ltd', and later was merged with Virgin Games to create 'Virgin Mastertronic'. Virgin had their own team of programmers and wrote many of their games in-house, a major change to the way Mastertronic previously organised itself.
It was Frank Herman who, in early 1987 spotted that Sega had no UK distributor for the Master System range. Mastertronic sold all they could get that year and were then appointed as distributors in France and Germany as well, and thus was Sega Europe was born. Branson undoubtedly wanted to buy Mastertronic in order to get into the growing Sega business.
Soon after the completion of the merger all the marketing effort went into full price games under the Melbourne House label and it was clear that the budget side was sliding into oblivion, the competition had become intense as everyone was recycling their old full price games as budget games. In addition, the children who used to buy 8-bit computers were now buying Sega and Nintendo consoles. Sega sales were booming so much that nobody really cared about the traditional Mastertronic business. Although staff recruitment actually rose, this was all for the Sega operations. By 1991 nearly all the company's turnover, and certainly all the profit, came from Sega-related business.
As a result nearly all the staff moved over to Sega when they took over the business from Virgin and only a handful of games programmers stayed with the publishing side (quickly renamed Virgin Interactive Entertainment). After the Sega takeover Frank became deputy Managing Director of Sega Europe and Alan was Managing Director of Sega UK. Martin left the UK and became resident in the US.
Influence on the industry
Compared to its main competitors, Mastertronic was a highly professional operation. The management understood that sourcing games was relatively easy while marketing and distribution was the hard part. Emphasis was set on creating a brand image, establishing distributor chains, persuading the larger high street stores to stock the product and ensuring a fast turn-round from the tape duplicators and the printers so that fresh supplies of successful games could be produced quickly.
Mastertronic also notably pioneered the 'colour-coding' for games by having a coloured triangle on the top right hand corner of the front inlay and rectangles on the spine with the catalogue number and format, for example ZX Spectrum games were yellow, Commodore 64 were red, Amstrad were orange and MSX were white. This led many software houses to use variations on this theme but keep the colour-coding so people could easily identify the format, Mastertronic for a time went one step further and their 199 Range had the cassette boxes coloured the same. The US releases pioneered the plastic DVD-style cases now common among computer and console games.
Much of the early output was supplied by just two producers: The Darling brothers, who formed Codemasters as soon as they could break their contract with the company, and Mr. Chip Software who continued to write games for Mastertronic for some time. Mastertronic never employed in-house programmers to write games. Everything that was published had been produced either by other software houses or by freelance authors. This was an ideal approach for the fast output of many diverse games. At this time thousands of bedroom programmers were trying to get rich quickly by writing games. While this was not so good for creating a consistent throughput of a series or for developing highly complex games, one huge advantage was that it kept overheads low and outsourced the risks of software development to others. Mastertronic did employ specialists to review and test games, to encourage and assist authors and to provide technical expertise. As well as permanent staff temporary assistance came from several of game authors, including Nigel Johnstone, Richard Aplin, Stephen N Curtis and Tony Takoushi.
One of Mastertronic's key markets was the Commodore 64. The famed C64 composer Rob Hubbard produced some classic music for the company's C64 range such as One Man and his Droid, Hunter Patrol, Spellbound, Action Biker, Phantoms of the Asteroid and Master of Magic. These are still regarded by many enthusiasts as classics and having music of this quality on budget-priced games greatly enhanced Mastertronic's reputation. However because the actual profit per unit sold was small, the company could not afford to advertise as much as full-price software houses. In the opinion of Anthony Guter, this led to some resentment from the game magazines of the day, these problems may well have hampered more general coverage of the software range.
The 'New' Mastertronic
Although the original Mastertronic no longer exists (having been absorbed into Sega's corporate structure), the name has recently been purchased for use by another company who are now known as 'Mastertronic Group'.
- Anthony Guter. "A History of Mastertronic". Archived from the original on 2014-10-02. Retrieved 2016-07-24.
Mastertronic Inc began to develop [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. [Arcadia] nearly killed the company because the project developed slowly and the games were poor quality and not well suited for arcades [..] 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.
- "An interview with Anthony Guter". Lemon 64. June 2002. Retrieved 2016-07-24.
[Mastertronic's most risky venture] was "Arcadia", the attempt to make amusement arcade machines using the new Amiga chips [thus] the same game that ran on an Amiga could go into an arcade machine, enormously reducing the development cost [but] there are huge differences between a game designed to take money on an arcade machine and a game designed to hold interest running on a home computer. Those of us in the company, including myself, who actually played games, knew this. The directors, who did not play games, did not. We committed to buying a huge number of chips and nearly bankrupted the business.