Love and Loss at Scarecrow Video

George and Rebecca Latsios know about obsession. Nearly a decade ago they turned theirs into a business, transforming their passionate love affair with movies into Scarecrow Video, a store one employee describes as "a film junkie's paradise."

Actresses Bridget Fonda and Winona Ryder, directors John Woo and Bernardo Bertolucci, and critic Roger Ebert are just a few of the film-world luminaries who made pilgrimages to the store. Singer and actress Courtney Love spent more money there on videos than any other customer. In movie-mad Seattle, the store quickly became a treasured resource.

As much as anything else, Scarecrow resulted from George and Rebecca's fanatical desire to make it the "absolute best video store in the world." Their obsession explains the endless hours at work. The nights spent sleeping on the store's floor. The years without a vacation.

But with the obsession came a price. Relentlessly pursuing obscure, hard-to-find films pushed the couple deep into debt. They kept buying movies, but missed loan payments and ignored tax bills.

Four months ago, the couple declared bankruptcy and on Tuesday, the landmark store on Roosevelt Way Northeast will be sold. George and Rebecca will turn over their keys - and their lovingly nurtured collection of nearly 34,000 movie titles.

"We're not structured like business people so we never did anything according to a budget," says Rebecca. "We just don't understand the concept. We paid taxes if we had money, but mostly we bought movies and didn't pay taxes."

Ask customers, employees, even the store's soon-to-be new owner about George, 38, and Rebecca, 37, and you hear a familiar refrain.

"They're the craziest film fans I've ever seen," says Lyle Holmes, a Seattle businessman whose family company, Directors Ltd., will take over as the store's owners next week. "I mean, how many people would fly to Japan just to pick up a video?"

Likable and low-key, the couple smile sheepishly at each other when discussing their relationship with movies and the store.

"Yeah, I guess we are a bit crazy," Rebecca says softly. "It took a certain amount of craziness and insanity. Seriously. If we would have been normal, say Harvard MBAs, there's no way that we would have done what we did."

What they did was fulfill their dream of creating one of the world's most diverse and highly regarded video stores and staffing it with incredibly knowledgeable employees who share their devotion. Measured by inventory or sales, Scarecrow is one of the 10 largest video stores in the country. Only eight stores nationwide can claim to have 25,000 titles or more.

But creating the business and keeping it afloat were two very different tasks. Success to George and Rebecca meant adding hard-to-find, must-have flicks. They ran their business with their hearts. Their hearts ran them out of business.

"I love them both dearly," says Sean Axmaker, 34, the store's inventory manager for the past 2 1/2 years. "They're sweet and they're conscientious, but they were so caught up in this dream that I guess they kind of lost sight of what it means to stay in business."

Take that little problem with the IRS.

"When there were a lot of good movies coming out, we were bad about paying taxes," says Rebecca. "We were bad more than we were good."

The tax bill grew and George and Rebecca ignored it. Or at least tried to. Occasionally, when pressed, they made payments. They explained their obsession to the IRS folks, but talking with the tax man about art films didn't get them far.

The government was polite, even sympathetic, but firm: Pay or we'll have to put chains on the door.

Periodic payments held the IRS at bay, but pretty soon it wasn't just the feds who weren't getting paid. City, county and state tax collectors were sending notices. Banks were calling about loans. Video distributors were waiting for bills to be covered.

From the very start, Scarecrow had never been a model of how to run a business, but the store's current financial mess has its roots in February 1995, when far more serious problems surfaced.

George's seizures were mild at first. Unexplained. Occasionally accompanied by headaches. Then the seizures became more severe. A battery of tests revealed nothing, so the doctor ordered an MRI. The brain scan revealed a tumor, which the doctors said had been growing for 10 years. There was not much hope, they told George. Six months or less to live was their best guess.

There was disbelief at first, and denial. There were all of the emotions you might expect. George did a lot of traveling, visiting friends he thought he might never see again.

George and Rebecca had another reaction to the illness as well. They spent even more time, effort and money on Scarecrow's collection. They held special screenings, went on an unrestrained spending spree to add more titles and began planning last summer's expensive animated film festival.

Rebecca relates the couple's thinking at the time. "George was kind of like, 'OK, I've got maybe a year to live, what do I want to do. I want to have an animation festival. OK, we'll do it.'"

Thirty-two months have passed since the doctors made their prognosis.

George, Scarecrow's friendly "maitre d'" who on weekend nights can often be found chatting endlessly with customers about directors, studios, and lost films, says he feels lucky.

Surgery earlier this year to remove much of the tumor was successful. And radiation therapy - George wears a baseball cap to cover the bald patches from the treatment - reduced what tumor tissue remained. For now, the treatments are over.

"I tell you, man, it feels good to be alive." He wags his finger and smiles, "Count your blessings."

The carefully planned animation festival was enormous. It lost thousands of dollars. Scarecrow's debt was out of control. The tax bill had reached $140,000. Other debts incurred by the store had ballooned to nearly $240,000. The Latsioses' personal debt climbed to $120,000.

Of course, all of the debt was really personal debt: Scarecrow had never been incorporated. George and Rebecca were Scarecrow. And they were half a million dollars in the hole.

Finally, it was all too much. The store had more titles than ever, but George and Rebecca were operating deep in the red.

"They spent all of this money, but George's driving motivation wasn't that he wanted to be top dog. It was that he really wanted everyone in Seattle to be able to see all of these movies," says Norm Hill, Scarecrow's 29-year-old promotions director. "It's kind of weird, but Seattle couldn't have had Scarecrow if George and Rebecca hadn't ruined themselves financially."

It wasn't the Hollywood ending the couple envisioned when they arrived in town 14 years ago.

George and Rebecca drove through Seattle on a honeymoon road trip in 1983 and immediately knew they wanted to live here. The young couple returned briefly to Pennsylvania, sold off most of their belongings, threw the rest in a truck and headed northwest. They arrived in town without jobs; their only valuable possessions were George's nearly 700 videos - most of them horror films.

It would be five years before they had scrimped and saved enough to open their store. The first location was a cozy, 800-square-foot space on Latona Avenue Northeast near Northeast 65th Street.

The little shop quickly became a big hit with the neighbors, many of whom visited the store regularly to browse through the quirky collection, rent obscure art films or classics, and share their love of movies.

The couple named the store Scarecrow Video - partly, as many customers assume, after the character in "The Wizard of Oz." But the name also has roots in George's youth in northern Greece, where his grandmother would tell him how scarecrows kept bad things away and the fields fertile. George and Rebecca wanted a store that kept away bad movies. They saw their store as a refuge for films that couldn't survive the commercial demands of chain stores like Blockbuster and Hollywood Video.

"In the video-rental business, inventory management is the overriding philosophy," says new owner Holmes. "That basically means if it's not renting, sell it. That definitely hasn't been (George and Rebecca's) philosophy."

With success, the couple added to their collection, continuing to buy movies that customers requested, no matter how obscure or hard to find. Buoyed by the store's skyrocketing reputation, George and Rebecca sponsored small film festivals and arranged for directors to lecture. Film lovers from points as distant as New York, California and Alaska visited regularly to pore over the store's astonishing collection.

By the early '90s, Scarecrow had far outgrown its Latona location. A new space was scouted out and in 1993 Scarecrow moved to its current home, 5030 Roosevelt Way N.E. The couple's love for film was obvious in the design and decoration of the two-story, 8,300-square-foot store - and in the ever-growing number of movies.

In its day-to-day operations, Scarecrow did well - gross sales reached $1 million a year - but George and Rebecca could never quite turn that into a net gain.

Last July, after the losses on the animated film festival, the Latsioses filed for bankruptcy. Holmes, whose family also owns Wallingford Video and On 15th Video, had heard about the financial problems. "Scarecrow was the mother of all eclectic stores and it was the mother of all troubled stores," he said. Holmes came into the store and began talking to George and Rebecca about buying it. By late August, both parties had agreed to the sale.

The $1.3 million price will take care of all the Latsioses' outstanding debts, with the rest to be paid to them over the next five years.

"We weren't interested in selling - this was our life, you know?" says George. "But I looked at the offer and there was no way I could turn it down. Knowing the store would be in good hands, would be debt-free, I couldn't walk away from it."

"What really convinced George and I to sell the business," says Rebecca, "is that in the last year the bills have been so high that we couldn't really buy all the weird stuff that we wanted to buy. George kind of felt guilty that he couldn't do that anymore."

For now, Holmes has no plans to sell off any of the collection, though he admits he probably will not buy obscure films at the pace established by the Latsioses.

He also has decided to eliminate Sanctuary, the store's 19-seat screening room, although he says the store will sponsor film festivals.

Customers at his two other stores - both of which will be renamed Scarecrow - will be able to reserve titles from Scarecrow's massive catalog.

George and Rebecca plan to help the new owners get through the holidays, and then they are thinking about a cross-country train trip. After that, they'll return to Seattle. George would like to open a toy store: His love for toys is almost as strong as his love for films. Besides, adds Rebecca, "Seattle needs a really good toy store. It needs more weirdness."

Both George and Rebecca admit that agreeing to sell Scarecrow wasn't easy. But one clause in their contract will go a long way toward easing their separation anxiety: free movie rentals for life.

Update:  Re-Rebirth