To create the dragon in "The Hobbit: The Desolation of Smaug," having Benedict "in a mocap suit … seemed to help get him immersed and home in on the character."

Peter Jackson's Weta Digital has released a new video exclusively to The Hollywood Reporter detailing its Oscar-nominated work to create the massive dragon Smaug and meld it with the performance of Benedict Cumberbatch for The Hobbit: The Desolation of Smaug.

"Our challenge with Smaug was making him every bit as engaging and believable as his live-action counterparts," explains David Clayton of Smaug's Oscar-nominated VFX team from Weta Digital.

Clayton tells THR that to get started, Cumberbatch came to Wellington, N.Z.'s Weta in early 2012. "Using our motion-capture stage, we recorded his performances, which focused on the conversation with Bilbo sequence. Having Benedict in a mocap suit was lots of fun -- for us, and hopefully for him, too -- and seemed to help get him immersed and home in on the character."

PHOTOS: Oscars: Watch the Trailers for the Best Animated Short Nominees

The animation team then grafted Cumberbatch's performance onto the CG dragon. "The translation of performance from Benedict to Smaug wasn't a one-to-one match like you'd get from a humanoid creature. They have very different physiologies," Clayton explains. "As animators we had to transpose the elements of Benedict's performance that were critical to the shot, such as head nuances and facial expressions. We then built up the majority of his motion with keyframe animation" --meaning that it was animated by hand.

VIDEO: Benedict Cumberbatch on Being a Workaholic, Coping With Fame and Avoiding Social Media

"Smaug needed a formidable presence, so we worked hard to craft impressive poses for his massive body, wings and tail. He also covered a full range of moods -- from supreme arrogance to paranoid suspicion, from curiosity to violent rage. Adding to his versatility as a character was the creation of his hands. We achieved this by adding a thumb and extra forefingers to Smaug's wings."

To allow Smaug to live in his chamber of Erebor -- which is filled with gold coins -- the team wanted his movement to be "confident and self assured. We got creative with his locomotion through the gold by plowing him through the coins like a train through snow."

STORY: Box Office: 'Hobbit: Desolation of Smaug' Nabs $31.1 Million Friday in U.S.

This was a formidable challenge, as the VFX team had to simulate all the coins with each movement of the dragon. Some of the action sequences involved hundreds of millions of CG coins moving at once."

As the Weta team built up Smaug sequences with more evolved animation, Cumberbatch used those visuals for additional ADR, working with the sound team (Smaug is also nominated for sound editing and sound mixing Oscars). "It became this great collaboration through which we were able to get the most out of this amazing character," Clayton says.

Email: Carolyn.Giardina@THR.com

Twitter: @CGinLA