Steve Jobs and Apple TV
Steve Jobs at a presentation for Apple TV. Photo by Bloomberg
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A presentation for LG Smart TV. The living room is the next frontier for Internet viewing. Photo by Bloomberg

They've conquered the music world, changed the face of cinema and become the most significant force in the cellular world. Now Apple and Google are conquering a new front, and it's the television screen in your living room.

Apple TV stands to be one of Apple's central investments over the coming year, and Nexus Q, unveiled last month, is Google's latest bid for breaking into this field. Microsoft, for its part, continues to push the Xbox as a technology platform with the power to connect your PC and TV – two for the price of one, if you will, gaming console included.

In the space between these giants, more than a few Israeli start-ups are also scrambling for a way in. Boxee, developer of the popular streamer device, is the biggest seller among the companies, but far from the only one. Playcast, Jinni, Comigo, PrimeSense, Stevie and Appside are all homegrown and hungry for a piece of the pie.

Appside, founded in 2010, is developing an app store for gesture-controlled entertainment, to be offered to consumers under the White Label brand. The games on offer currently only jive with Asus smart television sets, but the company recently signed an agreement with an Asian hardware manufacturer for Android-based gesture-recognition that works with any Smart TV.

The keys to Apple's secret garden

“The developers wanted to present application programs of their own, but today they admit that they haven't come up with a decent enough gesture system or an eco-system for developers,” says Jonathan Yaari, Appside's CEO and founder. “Apple apparently created a secret garden that no one can access. Google, which this year acquired Motorola, wants to be more involved in hardware. It's no surprise that a lot of firms working with the basic version of Android have given the keys back to Google. Amazon did that with the Kindle Fire, Lenovo and Hisense are doing it with Smart TVs. In the future we're also going to see with mobile."

This kind of separation, Yaari says, means that manufacturers must venture into hitherto uncharted territory. He gives an example.

“An Israeli customer purchases goes into one of the big electronics stores and buys a television. Up until now, TV manufacturers have had no contact with the average TV user. The way they contact consumers is still being hammered out," Yaari says. "But ever since cellular manufacturers were put into direct contact with their consumers, the situation has been turned on its head. Now TV manufacturers want contact too. There is a huge ability to create follow-up income. But the whole thing is still in its infancy."

An app store all its own

Sensing a major opportunity, Appside, with a model that looks a lot like the big app stores, is jumping into the picture.

About a month ago Asus, the first television manufacturer to implement the Appside system, unveiled its own app store based on Appside technology. Appside's business model envisions collecting hundreds of thousand dollars from manufacturers who adapt the platform to create an app store. In addition, the company continues to work with game developers, collecting 30% of the price of each application that is sold.

“For the end user, it's the Asus app stores. From our side, the operations are purely ours. We manage the app store, deal with the payments and determine the pricing policy,” Yaari says.

Making friends with the cable company

Jinni, another hot, young Israeli company, is developing an engine that recommends personalized viewing content via an application called Personality Entertainment. Users' behavior and reactions are monitored to measure taste in content, and viewers can use the engine to get recommendations either from a website or on their mobile device.

In early July, Jinni inked a technical cooperation agreement with Swiss telecom provider Swisscom. Two weeks earlier, it introduced a converter box for Belgacom, the Belgian communications provider. Details of the deal with Swisscom, which has 2 million subscribers, have not been disclosed, but it is estimated that it could bring Jinni revenues of $1 million.

Jinni's technology is used for viewing video on the XBox, which is made by Microsoft, Jinni's most important strategic partners. No stranger to playing with the big boys, Jinni also teamed up with Google to develop Google TV.

“Since its founding, Jinni has appealed to companies such as cable providers and directly to consumers with services like Jinni Mobile or Jinni.com,” says Yosi Glick, Jinni's co-founder, president and CEO. “From the start we built a company that knew how to operate in every contemporary model that sprang up. There's no way to know who will succeed in the end, but it's essential to be ready for every possible scenario."

Battle for the boob tube

As cable companies become increasingly threatened by Smart TV, one Israeli company is aligning itself with them. Playcast, which offers a range of high-quality games for TV, is using a cloud computer service to transfer its games directly to cable boxes.

This month the company signed an agreement with South Korean cable service provider CJ HelloVision.

Guy de Beer, Playcast's founder and CEO, says it's impossible to know who is going to win the battle for the boob tube.

"There are lots of players, and they each think the future belongs to them," de Beer says. "Right now, they are cooperating rather than trying to develop their own made-for-TV operating systems," said  de Beer.

Boxee, which streams TV from the Internet straight to your flat screen, is facing a direct threat from Google TV. The Israeli company has other woes, too: It is entangled in a regulatory battle with several cable companies.

Boxee had hoped to transmit live broadcast directly to its TV boxes, but Comcast, the U.S.'s largest cable provider, as well as the Motion Picture Association of America and cable providers Cablevision and Time Warner have asked the Federal Communications Commission for permission to encode their transmissions. This would effectively block Boxee and any similar companies from access.

U.S. cable companies are lobbying hard as their viewing base is being chipped away by dedicated content providers like Netflix, de Beer says. "The biggest danger comes when a technology platform is developed that can be an alternative to the cable companies," he says. "The cable companies have a long reach, and anyone who can write checks in the billions has a major advantage."

Jinni's Glick agrees. “The cable companies say to themselves, 'The higher the cost for content, the harder it will be for Internet companies to match the price,'" he says.

Luring gamers to the living room

While some companies are hammering for content, others are just playing games. Playcast and Appside are both trying to lure computer game-players to the television screen. With Playcast is forging ahead on input device-controlled games resembling those already seen from the likes of Nintendo and Sony, Appside is working on controller-free, motion-activated games, similar to those available on Xbox's Kinect.

“After Microsoft sold about 20 million Kinect units in 18 months, everyone realized that user gestures are the name of the game,” says Yaari. “Right now, gesture-based control has been adopted by most of the game developers trying to make the move from the computer to the living room, and also by most of the players in the Smart TV market. All of us are offering, at various levels, systems where gestures will replace the remote.”

Appside's games are not at all like those available at the Apple or Google app store, where gesture-controlled versions have yet to debut. In addition to its platform for content developers, Appside also has a distribution channel.

“The number of gaming developers working on body-gesture control is still small. In comparison, there are so many independent game developers working in this direction. What we are also able to do is take games that were developed for other platforms, like cellular, and adapt them for the operation systems of Smart TV," Yaari says.

While no one knows just exactly where the market is going, one thing is for certain: If start-ups can't take the heat, they should get out of the living room.