By 1989, The Transformers toyline was practically bifurcated into two nearly separate lines. The new Micromasters, sold with miniature playsets or in teams of four, formed half of the year's releases, while a new variety of Pretenders comprised the other half. The year showed a small surge in popularity, as the new Micromasters rode the craze of miniature toys spawned by Galoob's Micro Machines. However, the modern-day scarcity of 1989's Pretenders indicates the original sales of that line.
1989 saw a general downsizing. The Pretenders were smaller, the inch-long Micromasters replaced any full-size non-Pretenders, and only a handful of toys were large enough to justify packaging in a box rather than a blister card. The Micromasters filled the lower price points with a wider variety than had been available in years previous, and sold quite well as a result. The added benefit of interaction with the larger playsets, and the interconnectivity between those playsets closely mimicked a play patter that was making Galoob an iconic toymaker of the period.
Japans 1989 lineup, entitled Victory, looked nothing like the Hasbro selection. It included many all-new molds including several new combiner teams. Many of the figures were larger, and most of the Micromasters wouldn't see release by Takara until the following year. This was the year that Hasbro and Takara's Transformers were most divergent.
In Europe, a different scene was unfolding. Hasbro released most of the same toys seen in the US, but for some reason unlicensed versions of the original 1984 and 1985 characters were cropping up in stores with bargain-basement prices. As it turned out, Hasbro's Mexican licensee, Plasticos IGA, had huge amounts of overstock that couldn't be sold anywhere in Central America. In order to get out from under the stock, they exported it wholesale to Europe, where it competed directly with Hasbro's new products. Hasbro had to formulate an answer – IGA's unlicensed (in Europe) sales posed a legitimate threat. As it turns out, there was still a demand for the classic characters of 1984/5.
Despite the initial successes of the Micromasters at capturing the toy craze of the day, Transformers was on its way out in the US. Hasbro would attempt to revitalize the line one more time before it slinked into oblivion.