New labels, expansion and diversification
In late 1985 Mastertronic launched their Mastertronic Added Dimension (M.A.D.) label to sell games at a slightly higher price (£2.99).[6] The first game was The Last V8 and many more were soon to follow including Knight Tyme and 180.
Martin Alper, who had the most marketing flair, went to the United States 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.
In 1987 Mastertronic decided to expand its 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 it to re-issue their old full price product at budget prices, such as Rack-it for Hewson and Americana for U.S. Gold.
Their re-release label Ricochet was created in 1987[5] with their most successful release being Activision's Ghostbusters with nearly half a million copies sold.[7] A buyout of Melbourne House when that label was struggling with financial problems enabled it to add games such as The Way of the Exploding Fist to its re-release catalogue.
Video and music
In March 1987 Mastertronic launched the short-lived Master Vision and Master Sound labels, with an aim of releasing low priced video and music cassettes. During the brief life-span of the company, the only notable releases were the films Creepshow and The Exterminator.
Arcadia Systems
In 1987,[8] 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
Having bought Melbourne House and with heavy financial commitments to the Arcadia project Mastertronic (now renamed the 'Mastertronic Group Ltd') was now suffering severe cash flow problems. Virgin stepped in and 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 merger created Virgin Mastertronic although the company would continue to publish titles under the Mastertronic, Melbourne House and Virgin Games labels for several more years.
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 Sega Europe was born.
Sega takeover
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 game 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 a resident in the US.
