Started off with some simple flat shapes to get an idea of the composition and colours I wanted to use. 

Once I was happy with the colours, I started to build up the piece with some shadows. 

Adding some further shadows and some highlights.

Once I was happy with the lighting, I overlayed the whole scene with a dark blue colour to give it that night time look. Also added some mist around the mountains to give it a little bit more of an ethereal feel. Then took a break to gaze intensely into the fireplace and sing the 'Far Over the Misty Mountains' song from the first movie. :) 

Song done, I got back to work and added in the characters.: Smaug, Gandalf and Bilbo. I played with the idea of placing the thirteen dwarves in the scene too, but no matter how I approached it, it just looked too busy, so I made the decision to leave them out. Working with silhouettes, I felt that Gandalf and Bilbo cut the more interesting figures in any case. I also added the reflections in the water at this point too. 

To finish, I added some textures to the piece. 

Illustration done, I moved onto the text. I wanted to somehow depict the ring in the piece, so I added the circle behind Tolkien's name. I also like how the yellow of the ring popped against the blue tones of the scene behind it. 

Lastly, I designed the spine and back cover, again using the ring motif, plus the elvish script that appears on the ring, to enhance the text and overall design. 

Detail of the barcode I designed for the back cover.