Legends of Oz: Dorothy's Return is an unofficial animated sequel to L. Frank Baum's famous tale, The Wonderful Wizard of Oz. Despite that pedigree -- and a fair amount of star power with Lea Michele, Dan Aykroyd, and Martin Short among those voicing key roles  -- the movie has flopped at the box office. What should entertainment stock investors take from this? Are there lessons to be learned?

Guest host Alison Southwick puts these questions to analysts Nathan Alderman and Tim Beyers in this week's episode of 1-Up On Wall Street, The Motley Fool's web show in which we talk about the big-money names behind your favorite movies, toys, video games, comics, and more.

Legends Of Oz Tin Man Lion Scarecrow

Legends of Oz: Dorothy's Return could end up as one of 2014's biggest flops. Credit: Summertime Entertainment.

Nathan says there's a sketchy backstory to the film's production that's risen to the level of finger pointing and conspiracy theories. All we can say for sure is that Legends of Oz was largely funded by six-figure contributions from individual investors. At least one report says the producers raised $100 million for the movie and at least two sequels by cold-calling prospects.

Alpine Pictures' Summertime Entertainment division produced the movie in concert with India's Prana Studios. Clarius Entertainment distributed Legends of Oz, but apparently without offering enough support to draw a meaningful audience. BoxOffice.com estimates marketing and distribution spending at just $15 million for a movie that cost $70 million to produce. Legends of Oz had grossed just $7.2 million worldwide heading into the long weekend.

Both Tim and Nathan say that, while there's nothing inherently wrong with backing a project directly, it's almost never a good idea to respond to a cold call. Instead, seek the sorts of disclosures required by fundraising platforms such as Kickstarter. Find out exactly how producers will allocate money: who gets paid, how much, and for what services. That way, you'll know exactly what you're investing in.

We've also seen the direct-funding model work while offering just these sorts of protections. Nathan invested in the Veronica Mars movie while it was still in the early stages at Kickstarter. Time Warner (NYSE:TWX) agreed to distribute the finished product, which has gone on to gross $3.5 million worldwide at theaters, and likely a great deal more than that via DVD, Blu-ray, and digital downloads.

Now it's your turn to weigh in using the comments box below. Have you seen Legends of Oz: Dorothy's Return? Did you invest in the movie? Click the video to watch as Alison puts Nathan and Tim on the spot, and then let us know your thoughts. You can also follow us on Twitter for more segments and regular geek news updates!

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Neither Alison Southwick nor Nathan Alderman owned shares in any of the companies mentioned in this article at the time of publication. Tim Beyers owned shares of Time Warner. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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