Editorial: 38 Studios and the Dunkin delusions

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The Providence Journal sat neatly presented on the counter at the Dunkin Donuts across the street from 38 Studios in Rhode Island, its headline clear as day: "Loan-guarantee fallout costs EDC chief his job." Further down the right column of the page was the other harbinger headline: "Too little cash to cover the check."

This was last Friday, May 18, the day after the head of the Rhode Island Economic Development Corporation, the quasi-government group responsible for co-signing the $75 million loan to 38 Studios, was fired. It was also the day after the state couldn't deposit a $1.12 million check the studio delivered as a payment because the company's chief financial officer called to say there were insufficient funds.

A man walked up to the counter for his morning caffeine fix. I guessed he worked at 38 Studios because he had 'the look.' The lady working the counter confirmed my egregious profiling by asking, "How are things going over there?"

"Still here!" he said with no hesitation.

"The papers and stuff don't make it sound good. What can I get you this morning?"

And instead of making his order, he felt the need to vent a little, pointing to the papers on the counter. "It's the ProJo, they're like The Enquirer. They're just trying to sell papers. Websites are just trying to get clicks. They're all looking to sell ads."

I've covered a lot of companies in distress; I've gotten the hate mail that comes with it. It doesn't matter if the truth comes out a week later, I can accept the rage. What I've never been able to witness before is the denial.

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Employee after employee walked into that Dunkin Donuts, and the ladies working there unknowingly helped me spot every single one of them. People coming in looked at the newspaper sitting on the counter, then looked at the woman behind the counter. She'd ask how things were and they'd give some flowery response.

It hurt to watch. It was like being a nature photographer and filming a gazelle, as a lion slowly stalks it. Instead of nature taking its course you scream, "RUN! Run, little gazelle, there's a lion behind you!" But instead of running, the gazelle simply cocks its head and says, "What? It's just a lion. It'll be fine."

Sitting there, listening to all these optimistic sound bites, I became paranoid. Had we in the media gotten everything wrong?

The lack of urgency slowly started eating at my heart. I admit, I had a rough time breaking through and getting any inside info about the condition of 38 Studios, so maybe they knew about some savior. Usually when these collapses happen there are one or two folks feeding me real information. Heck, most of the time, it's the management trying to angle a better outcome. In this case, I heard nothing.

I wasn't alone in finding the reactions of these employees odd. A contact emailed me about one of her friends at the developer: "I have to get this off my chest. Watching the 38 Studios thing unfold has been like watching a friend stay in an abusive relationship and say, 'Well, he doesn't really mean it when he hits me' and then when he leaves and takes everything, they say, 'Thanks for the good times!'"

Sitting there, listening to all these optimistic sound bites, I became paranoid. Had we in the media gotten everything wrong? Was the state of Rhode Island lying to us? We had documentation; everything we were reporting was checked and sourced.

I stepped out of the Dunkin for a while and phoned a friend, "Dude, seriously, I'm freaking out here. I'm listening to all these people act like nothing is wrong and I'm starting to worry we have the story incorrect."

Call my reaction overly dramatic if you want, but I was reporting on hundreds of people's jobs, millions of dollars in taxpayer-backed assets. He was a good friend, and talked me down. Reminded me we had the documentation and the quotes.

"Yeah, but. But... you're not listening to these people. It's really frightening. They think nothing is wrong and that we've made everything up."

We ended our conversation. I walked back in to the Dunkin and another guy from 38 Studios walked up to the counter and asked for three dozen donuts, with the order: "The more fun they are, the better. Let's not think healthy."

"You guys hear some bad news?"

"This is me just making my friends happy. This'll all work out."

It didn't.

Yesterday, a week after I sat in that Dunkin Donuts and watched people who deserved to know the reality of their situation speak as if nothing was wrong, 38 Studios laid off its full staff of approximately 400 employees, which included the team at Big Huge Games in Maryland. Soon after, 38 Studios founder and chairman Curt Schilling was seen driving out of the building past reporters in his BMW, a box of his belongings rattling around in the backseat.

Could the lesson be that we have the capacity to believe everything is going to be all right when the evidence is stacked against us? Who knows. Maybe I'm just trying to share a personal story I hope to never experience again, and get some clicks.

This article was originally published on Joystiq.