Amazon Gives in to Publisher; Stock Sinks

NEW YORK (TheStreet) -- Amazon's(AMZN) stock is sinking after it said it is giving in to Macmillan and raising prices on some electronic books.

Last week, the e-retailer removed some of Macmillan's titles after the publisher said it planned on upping prices for e-books.

But over the weekend Amazon said it would accept Macmillan's decision. "We have expressed our strong disagreement and the seriousness of our disagreement by temporarily ceasing the sale of all Macmillan titles," Amazon said. "We want you to know that ultimately, however, we will have to capitulate and accept Macmillan's terms because Macmillan has a monopoly over their own titles, and we will want to offer them to you even at prices we believe are needlessly high for e-books."

Starting in March, the publisher will set the consumer price for each book and Amazon will take a 30% commission. Most new releases will cost between $12.99 and $14.99.

Amazon has traditionally set e-book prices at a default $9.99 for new releases and best sellers.

But analyst Colin Sebastian of Lazard Capital Markets says higher e-book prices may not be a bad idea, as it could lead to higher margins.

"While the irony is palpable that increasing competition in the e-book market might actually push prices higher (back to the physical format levels), we note that Amazon could turn e-books from loss leaders to profit generators," he wrote in a note.

Regardless, shares are falling 6.7% to $116.97 in morning trading.