Lies, Damn Lies, and Gaming Stock Market Predictions

You may or may not have heard the story that shot around the gaming sphere last week – that a stock analyst at Lazard Capital Markets had downgraded Blizzard/Activision’s stock from “buy” to “neutral”, based on a survey of 381 online gamers, which implied that WoW was about to drop a lot of subscribers.

There’s been a number of comments on this article, mostly talking about the advisability or inadvisability of relying on such small numbers. However, today we’ve got a piece from The Undercity, talking from a position of some expertise about the problems with the analyst’s approach, and where they actually were or weren’t

“Ok, first things first. Idiots on the internet, 381 people polled is –precisely- the right amount for a survey to have a 95% confidence level with a 5% margin of error in a population of 10 million. This is the industry standard for polls, btw, the 95 with 5%. What it means in simple terms (and keep in mind I don’t know anything about this except some common sense deductions) is that:

  • the numbers the survey shows are accurate within 5% (so when they say that 50% of players… the real number could be 45% or it could be 55%… within 5%).

  • 95% of the time these numbers will be accurate. So if you did this poll 100 times with different groups, you’d get the same numbers (within 5% as a margin of error) 95 times.

Got that? The numbers are fine. And surveys/polls are very easy to do. No matter the size of the population, if you’re going for the industry standard of 95% with a margin of error of plus minus 5%, you never need more than 380ish people. That’s just how the math works. If you wanted a smaller margin of error, like 2%, you’d need about 2400 people. That’s all.”

The article goes on to talk about what appears to have been wrong with the poll, which is at least as interesting – how were the poll-takers chosen? How were they advertised for? Are the pollsters comparing active SWTOR beta players with bored WoW players?

It’s really interesting to read a more sophisticated take on this news – it’s pretty obvious that an analyst isn’t going to change a major stock buy recommendation based on anecdote alone, but it’s also interesting to see where he or she may have gone wrong.

Overall, though, the question still remains – will the prediction be accurate? As the SWTOR beta weekend has shown, the Star Wars gameplay is very close indeed to WoW, and it’s clearly targetted at the same audience – doesn’t that almost necessarily mean that Blizzard’s fortunes will be on the downturn from December, if SWTOR is even half as good as it seems to be?

What do you think? Will Blizzard hold steady?