With the acquisition of a major u.s. 3D animation studio, a similar facility being set up here, and its first 3D project now in production, Nelvana’s two-year plan is coming together in the potentially lucrative yet still largely unexplored 3D animation arena.

Nelvana has signed a letter of intent to acquire the remaining 83.3% of shares of Minneapolis-based Windlight Studios for $3 million. Windlight is a high-end 3D production studio with expertise in commercial cg work and developing motion-capture systems and has been involved in software development in association with Silicon Graphics arm, Toronto-based Alias|Wavefront.

Nelvana first invested $350,000 in Windlight in July 1995, when the Toronto company gained 16.7% of Windlight shares through 1% equity interest worth $21,000 and a convertible loan for the balance. The recent deal for the acquisition of the rest of the company is expected to be completed by the end of November. Windlight shareholders have the option to receive up to 30% of the purchase consideration in cash and 70% in shares of Nelvana.

At the same time, Nelvana is setting up a 10,000-square-foot 3D animation facility adjacent to the Toronto offices through which Nelvana co-ceo Patrick Loubert says the company will develop proprietary cg projects and continue to explore emerging 3D animation technology.

The new studio is located in a facility formerly rented by Nelvana to Westwood Studios and is expected to be operational early in the new year. Nelvana will invest up to $1.5 million in gear, which will likely be based on Silicon Graphics hardware and Alias| Wavefront and Softimage software, but Loubert says technology will also be based on production partners and projects.

‘Ours is a business of coproductions,’ says Loubert. ‘We will tailor our operation to our coproduction partners’ already established facilities, so we may change technologies from production to production.’

Loubert says the new arm will employ about 15-20 people in the first 15 months and possibly upwards of 50 thereafter depending on production levels.

Windlight president Scott Dyer and about six additional senior Windlight people are relocating to Toronto to assist in the establishment of the new facility.

Dyer will act as head of the 3D department and Nelvana’s Pamela Slavin is supervising producer on Rolie Polie Olie, the arm’s inaugural series project.

The pilot for Rolie Polie Olie, based a poem by children’s author and illustrator William Joyce, was produced jointly by Nelvana and Windlight this year and has been sold to the Disney Channel for the 1998 season. Nelvana is currently in negotiation with a European coproduction partner, expected to be announced in the next few weeks.

The 13-episode series, being produced in Minneapolis and Toronto, is currently about halfway through the script stage, says Slavin, with character design underway and the storyboard phase beginning. Animation will commence in the new year.

Nelvana’s Toronto operation recently restructured into four divisions – 3D animation production, animated tv production, domestic production, and feature film production – and has focused anew on proprietary production.

Over the course of two years, Nelvana has been gearing up for its entry into the 3D arena, efforts which have included participation with Paris-based Medialab in the 3D series Donkey Kong Country, which makes heavy use of Medialab’s motion-capture technology.

Loubert says the company has a number of cg projects in development and says the follow-up to Rolie Polie Olie will be even more significant to the new division. The second project, he says, will likely be in the action/adventure genre and utilize motion-capture technology to a large degree.

With the feature division, Loubert says a 3D feature film is a possibility and adds the new facility could also be used to produce interactive multimedia projects based on Nelvana characters.

Loubert says Nelvana will recruit for the new division from talent in Toronto, Vancouver and the u.s. and the company has had discussions with Sheridan College.