The sad demise of the Web's best video-game site.

On a Thursday afternoon in mid-January, Denver writer and University of Colorado professor David Thomas was IM-ing with Elise Vogel, the managing editor of Crispy Gamer, sort of the Spy magazine of video-game sites. Thomas was part of Crispy’s “Game Trust,” a carefully chosen, outspoken assemblage of the finest writers in the video-game industry (disclosure: I was, too.) Thomas noticed a delay in Vogel’s response. When she returned, she wrote that she had some news, which she described as “insane.”

Chris Heldman, the site’s CEO and a former Google (GOOG) executive, had pulled her aside to tell her, “It’s over.” The Crispy Gamer board had decided to fire everyone after two years of publishing. Vogel was canned. Then Heldman then got on the phone to call each of the site’s handful of full-time staffers. There would be no more editorial content on Crispy Gamer, which Paste magazine once called “the number one site for the thinking gamer.” Heldman, the man who had the idea to launch the video-game site in the first place (along with co-founder Andre Srinivasan), also decided not to continue in his role of CEO.

Word of Crispy Gamer’s demise hit Twitter and Facebook and spread like wildfire. Tweeters seemed shocked, stunned, and saddened that the only gaming site in the world not to run advertising from video-game companies had crashed and burned. Its demise is a cautionary tale for independent Web publishing, but is also a familiar story of tech dreams that die after launches that are badly timed, mismanaged, or simply have a huge gap between employees’ visions and venture capitalists’ imperatives.

On Jan. 14, John Teti, Crispy’s talented writer/videographer and a former associate producer at The Daily Show, was summoned into a two-hour meeting with Tom Wasserman, a member of Crispy Gamer’s board, representing a venture wing of JPMorgan Chase (JPM). The latter, Constellation Growth Capital, had raised $8.5 million in venture capital for a majority stake in Crispy Gamer. Wasserman, a managing partner at Constellation who sits on three other boards, was outwardly genial in the meeting in Constellation’s office, which was also attended by a consultant whom the Crispy Gamer board had hired. But, inwardly, he was not pleased at all by the site’s middling traffic and dismal ad revenue. Yet he said the board admired Teti’s work in particular.

Another long meeting took place on the next day. During the meetings, it was revealed to Teti that the board had decided to fire nearly everyone at Crispy Gamer. Strangely, though, Wasserman said the board wanted to continue Teti’s popular video pieces. Wasserman was fond of a video feature written by Teti and Scott Jones called The Internet’s Fastest Game Reviews, five or six tightly edited seconds of searing deadpan humor in which the games of the day were skewered. (It was a style that Microsoft [MSFT] seemed to crib for some of its Windows 7 Web ads.)

Constellation offered Teti an extraordinary salary and complete creative control of what would remain of Crispy Gamer. But then Constellation indicated that Teti’s videos might well be used within pop-up ads on other social networking sites that Crispy Gamer had purchased recently. Constellation gave Teti some time to think about it. But if Teti didn’t cooperate, Wasserman said, “We’ll go in a sharply different direction.”