Lottery Winner Taps Geffen's Risk-Sharing Secrets to Make Films

Cynthia Stafford’s career sounds like a Hollywood movie pitch: A single woman who quits her job to raise her deceased brother’s five kids wins part of a $112 million lottery jackpot.

She goes on to produce films. She rubs shoulders with stars like Angela Bassett and Halle Berry. She gets pointers from DreamWorks SKG’s co-founder, David Geffen.

Her work this year will decide whether she can write a happy ending. Stafford’s Queen Nefertari Productions LLC, formed with her 2007 California Mega Millions winnings, is making its first films, the supernatural thriller “Undying” and the comedy “Adrenaline.” She recalls Geffen’s counsel: Spread the risk, or she’d be better off trying to win the lottery again.

“His advice was, ‘Don’t do it unless you have a large sum of investors’ capital,’” said Stafford, 47, who talked to him as part of donating $1 million to the Geffen Playhouse in Los Angeles. “I said, ‘Well, I intend to.’ He got a little quiet and said, ‘If that’s what you’re going to do, be smart about it.’”

Hollywood can be tough on newcomers who typically don’t understand movie finances, said James D. Stern, a Tony Award- winning Broadway producer who co-financed the Oscar-nominated drama “An Education.” Only about three in 10 movies make money, according to Harold Vogel, author of “Entertainment Industry Economics: A Guide for Financial Analysis.”

Photographer: Alberto E. Rodriguez/Getty Images

Cynthia Stafford is co-financing “Undying” with Montreal-based Media 8 Entertainment Ltd., Northern Lights Films LLC andLondon-based Entertainment Motion Pictures. Close

Cynthia Stafford is co-financing “Undying” with Montreal-based Media 8 Entertainment... Read More

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Photographer: Alberto E. Rodriguez/Getty Images

Cynthia Stafford is co-financing “Undying” with Montreal-based Media 8 Entertainment Ltd., Northern Lights Films LLC andLondon-based Entertainment Motion Pictures.

Luring Investors

“When you first come to Hollywood, people assume you don’t know how to make a deal,” said Stern, who founded film production company Endgame Entertainment in 2003. “People are there to take advantage of you. As an industry we don’t have a long-term point of view of taking care of people who have capital.”

Stafford’s business plan is built on sharing financial risk as laid out by Geffen, who Forbes ranked last year as Hollywood’s richest man with a $5 billion fortune. He declined by e-mail to comment.

The $30 million fund she set up for moviemaking includes contributions from several private investors, said Jeff Kalligheri, head of productions at Santa Monica, California- based Queen Nefertari.

Stafford is co-financing “Undying” with Montreal-based Media 8 Entertainment Ltd., Northern Lights Films LLC and London-based Entertainment Motion Pictures.

Kurt Russell has signed on to star, and Jon Amiel, whose credits include “Creation” and “Entrapment,” will direct. They want to reduce costs in the budget, projected at $20 million to $30 million, with tax incentives as production starts this fall, Kalligheri said.

‘Swimming With Sharks’

“We’re looking for projects that we don’t have to put up full equity for,” Kalligheri said. “If we can’t structure a deal in a way that makes sense, we’re just not going to do it.”

Stafford’s advisers include Jay Cohen, head of the film- financing unit for Gersh Agency, who has helped set up movies such as “Bride Wars” and “Swimming with Sharks.” He forwards potential projects for Kalligheri and Chief Operating Officer Lanre Idewu to recommend to Stafford.

The strategy may not protect Stafford. The motion picture business is getting tougher even for the biggest producers because studios are distributing fewer films to reduce costs, Vogel said.

“A cancer vaccine, a peace-making process, there’s a demand for that,” Vogel said. “Another movie, where’s the shortage?”

Lucky Number

Stafford said she understands the risks of filmmaking. She kept a portion of her winnings in stocks, though she says that hasn’t felt much safer this year than producing movies.

“With movies, yes, it’s a risky business,” she said. “But it’s also a fun thing if you do it right. And it’s a creative venue.”

Stafford won her fortune on Mother’s Day 2007 with a $2 lottery ticket she bought with her father and a brother, opting to split a $67 million immediate cash payout. She had quit a job at her father’s auto wholesale business to care for her nieces and nephews in the Los Angeles suburb of Hawthorne, after another brother was killed in a car accident.

More than a year before winning, the figure of $112 million came to her, she said. Stafford said she wrote down the number and tried to focus on it during busy days raising kids.

“I come from a sales background and I remembered from my training to write down my goals,” Stafford said. “I wrote it pretty large and put it on my wall.”

She bought her ticket when she noticed the California Mega Millions jackpot was $112 million.

It may become the stuff of movies. Kalligheri said that after completing “Undying,” Queen Nefertari will consider producing Stafford’s life story.

To contact the reporter on this story: Michael White in Los Angeles at mwhite8@bloomberg.net.

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