Merger talks between Random House and Penguin could be the first sign of a big shake-up for the publishing industry. - 

Publishing giants Random House and Penguin Books have confirmed they're discussing a possible merger. Some analysts say this could be the opening round in a long-expected consolidation of the entire publishing industry.

Size may well matter when it comes to competing with the likes of Amazon and other mass-marketing giants and the growing threat of ebooks sold through self-publishing channels. Publishing houses need to realign their business to stay viable, says Ned May, vice president of book industry analyst Outsell. "They're hoping to really increase in size, get the clout with the authors so that they can compete in this new world," May explains.

Not everyone is convinced that scaling up will solve the industry's problems. Michael Norris, an analyst at Simba Information and editor of the trade website Book Publishing Report, is among the skeptics. He suggests there are no guarantees that the two publishers won't have the same problems once they're combined.

Other analysts say publishers have no choice but to streamline, with revenue from the sale of physical books shrinking. Forrester Research analyst James McQuivey thinks the merger discussion between Random House and Penguin is just the start of a new round of consolidation. "This may be the one that we're hearing about," he says, "but I have a hunch it's not the only one going on."