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Penguin and Random House to merge and compete against Amazon and Apple

Publishers Penguin and Random House will merge to create a joint venture in a bid to better compete in the rising eBook market, it was announced today.

Parent companies Pearson and Bertelsmann have agreed to combine their Random House and Penguin businesses to create Penguin Random House in a deal estimated to be worth $3 billion (£1.86 billion).

According to German media company Bertelsmann, the deal will grant it 53 per cent of the new venture, while Pearson will receive a 47 per cent stake.

The merger means the newly created Penguin Random House could account for nearly a quarter of overall UK and US book sales, according to The Financial Times. (opens in new tab)

Industry observers say the merger is a bid to strengthen negotiating power against eBook giants Amazon and Apple. Publishers are being hit hard as consumers shun traditional High Street bookshops in favour of digital, with Amazon now accounting for 90 per cent of the UK eBook market. (opens in new tab)

As eBook sales continue to grow, publishers face concerns over how they will survive as their margins are squeezed by companies offering competitive prices on digital titles.

Pearson chief executive Marjorie Scardino said the combination would allow Penguin and Random House "to share a large part of their costs, to invest more for their author and reader constituencies and to be more adventurous in trying new models" for the continually changing landscape of publishing.

"Penguin is a successful, highly-respected and much-loved part of Pearson. This combination with Random House will greatly enhance its fortunes and its opportunities," she added.

Thomas Rabe, Bertelsmann chief executive, said he expected the move to allow the combined businesses "to publish even more effectively across traditional and emerging formats and distribution channels," such as eBooks and the mobile web.

Image Credit: Flickr (prendio2 (opens in new tab))