Formed as Virgin Games in 1983,[12] and built around a small development team called the Gang of Five, the company grew significantly after purchasing budget label Mastertronic in 1987.

[12][13] As Virgin's video game division grew into a multimedia powerhouse, it crossed over to other industries from toys[14] to film[15] to education.

[13] As result of a growing trend throughout the 1990s of media companies, movie studios and telecom firms investing in video game makers to create new forms of entertainment, VIE became part of the entertainment industry after being acquired by media companies Blockbuster and Viacom, who were attracted by its multimedia and CD-ROM-based software development.

Being located in close proximity to the thirty-mile zone and having access to the media content of its parent companies drew Virgin Interactive's U.S. division closer to Hollywood as it began developing sophisticated interactive games, leading to partnerships with Disney and other major studios on motion picture-based games such as The Lion King, Aladdin, RoboCop, and The Terminator, in addition to being the publisher of popular titles from other companies like Capcom's Resident Evil series and Street Fighter Collection and id Software's Doom II in the European market.

Within the late-1990s, the North American operations were sold to Electronic Arts, while the European division later went under the hands of Interplay Entertainment and Titus Interactive.

Mastertronic had opened its North American headquarters in Irvine, California just a year earlier to build on its success at home,[2][20] though growth exhausted its resources after expanding in Europe and acquiring publisher Melbourne House.

Mastertronic had been the distributor of the Master System in the United Kingdom and is credited with introducing Sega to the European market, where they expanded rapidly.

[25] It acquired 75 percent of VIE's stock later in 1994 and purchased the remaining shares held by Hasbro in an effort to expand beyond its video store base.

Viacom is the owner of Paramount Pictures and MTV, which made Virgin Interactive part of one of the world's largest entertainment companies.

While it abandoned the Spelling sale some time ago, the collapse in the games market appears to have killed off any interest in buying Virgin.

[6][26] Blockbuster and Viacom invested heavily in the production of CD-based interactive multimedia—video games featuring sophisticated motion-picture video, stereo sound and computer animation.

The European division though was put out in a majority stake buyout backed by Mark Dyne, who became its chief executive officer in the same year.

[40] The deal was made following a similar distribution agreement in North America that would allow Interplay to market Titus' titles in the territory.

[41] Virgin's presence outside Europe at this point was almost non-existent, with only a few titles such as Viva Soccer and Jimmy White's 2: Cueball, which was distributed in the North American market by Bay Area Multimedia instead of Interplay.

In August 2004, the company launched a PC budget range titled "Just2Play" with Dutch publisher Xing Interactive for the UK and Benelux territories.