While a larger rug would help to incorporate more of the room, pulling the existing rug close to the couch and chair will tie this area together. Angle the chair into the room, with the ottoman out front, to fill the space and create a more relaxed atmosphere.
Add Warmth: Pillows are an easy and relatively cheap solution for adding color and texture. The current pillows look a little sad, and more like leftovers than a conscious decision. Incorporate pattern and color through pillows and/or throws. This will work to soften up the space and make it a bit more welcoming. A large house plant would also do the trick, as well as more artwork on the walls.
Make it Functional: It's easy to migrate toward things that look cool, losing sight of what actually works in the space. Where is there a convenient place to set your drink near the couch? Does the layout allow a group to have a conversation with the flexibility to shift furniture for a TV-centric space? Prop the TV up on a small console placed flush against the wall, adjacent to the window. Locate a large plant in the niche next to the fireplace to hide some of the wiring. This will help make the corner less of an eye-sore and provide a home for the TV and related accessories.
Even with the perfect furniture, if your space doesn't function, it's not a true success. Determine how you live and move through the room and build your space around that concept.
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Images: Kathryn Wiens