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Penguin and Random House: Will they combine to form the world's biggest publisher?

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The two companies are considering the merger during a period of great flux in publishing. Publishing is undergoing major changes due to a number of factors including the emergence of digital books, the growing power of web retailers like Amazon, the growth of self-publishing, and the disappearance of traditional bricks-and-mortar bookstores. All in all, these changes have made it harder for publishers to reach readers and to exert control over the books landscape. (That perhaps is why both Random House and Penguin saw revenue decline slightly in 2011, according to the WSJ.)

A merger could reinvigorate the companies and make them more competitive in a changing industry, an industry executive told the WSJ. “A merger would allow the two companies to cut costs while giving the new company more clout to stand up to retailers like Amazon and more resources to compete internationally," said one industry executive.

It would also follow analyst predictions of consolidation among the “big six” publishers, a probable move “in an industry where independent bookstores are giving way to national chains and large technology companies who control e-book stores,” writes the Financial Times.

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