In 1993 Super Mario was bigger than Mickey Mouse, and so Hollywood decided it would be a good idea to make a Mario Bros film. It wasn't

In the early 90s, Mario the plumber was more famous than Mickey Mouse. He was so famous he got his own film, and while the Super Mario Bros movie was the first-ever videogame adaptation, it was so bad it was almost the last. The game's hallucinogenic, 8-bit world of piranha plants, pipes and mushrooms made it an unlikely property for a live-action adaptation, and so it proved. Super Mario Bros has gone down in legend as the Heaven's Gate of the videogame movie, nearly destroying the entire genre singlehandedly.

And yet it all began so promisingly. In 1991, producer Roland Joffé, best known as the director of The Killing Fields, made a trip to Japan to secure the movie rights to Super Mario Bros. Tea played a big part in his seduction technique: he sent box after box of fine brews to Nintendo president Hiroshi Yamauchi. "It was an expensive process," he says of the 10-day courtship-by-beverage. "Though not as expensive as if we were the likes of Paramount or Disney with $5m to spend on the rights."

Joffé's offer began at just $500,000, rising to $2m, with the promise he wouldn't do "a sweet, little lovey-dovey story". Incredibly, Nintendo ignored the studios and agreed, even signing away creative control over the movie. "They looked at the movie as some sort of strange creature, [intrigued] to see if we could walk or not."

Joffé and his directors Rocky Morton and Annabel Jankel, co-creators of the TV show Max Headroom, wanted Mario to grow up. Shooting in Blade Runner-style sets in a cement factory in Wilmington, North Carolina, they catapulted Mario (Bob Hoskins) and his brother Luigi (John Leguizamo) into an alternative universe ruled by humanoid dinosaurs. "This wasn't Snow White and the Seven Dinosaurs," Joffé says. "The dino world was dark. We didn't want to hold back."

When major distributors flew in to the set to hammer out a deal for the movie, they were shocked by what they saw. There were extras playing streetwalkers, fetish outfits and monsters that looked like rejects from Tod Browning's Freaks. Nobody whipped out their chequebooks. A 10-day rewrite was ordered. Says Morton: "[The producers] changed the material to accommodate the comments that were coming back from the studios, which was: this was supposed to be a kids' movie."

Concerns assuaged by the new screenplay, Hollywood Pictures, part of Disney, bought the movie. But when the cast and crew read the new script, they rebelled. The directors considered walking, yet worried they'd be tainted. "We thought, maybe as we're shooting we can steer it and make it into the film we wanted," says Morton. "We were wrong: we were unable to do that and it became a huge mess." Rewriting between shots was nightmarish; the finished movie was all over the place.

Returning to Hollywood, the directors were greeted by a Los Angeles Times article detailing their overruns and the on-set bickering. "We were like lepers in Hollywood," Morton says. "To this day people say: 'You did Super Mario Bros? Oh God … ' It was 20 years ago, but it's still there. What can you do?"

Nintendo shrugged off the movie's failure. The Super Mario Bros 3 game had earned more than $500m in the US; the Super Mario Bros movie took $20m. A momentous power shift in the entertainment landscape was underway.

"Yamauchi correctly saw that we had a tiger by the tail," says Peter Main, Nintendo's former US head of sales and marketing. "He was very adamant that we stay tightly focused on videogames, without being distracted with other 'leverage opportunities'." Future Hollywood advances were stonewalled.

Joffé, however, remains fond of the movie. "It was an interesting and rich artefact and has earned its place. It has strange cult status." He never heard what Yamauchi made of it. "They never phoned up to complain. Nintendo were very polite. I'm sure they had their own feelings, but they never sent the tea back."

Generation Xbox: How Videogames Invaded Hollywood by Jamie Russell is published in January by Yellow Ant.