I don't think most MUDs lose as many players to graphical MMO's as many people thing. Everyone I know IRL who plays games like World of Warcraft would never think of touching a mud. "It's just words? Ugh!". From what I've seen a large portion of their players share this mentality, and so MUDs aren't losing out on a lot of potential players.
In terms of current mudders leaving for MMO's, it does seem to be a temporary thing. They'll play, say, WoW for a few weeks, but once you're a higher level and have a lot of nifty equipment the novelty really wears off. Muds, on the other hand, offer far greater variety. There's hundreds of them, and the majority are free. Plus there's a lot more to do in most than kill goblins until you're level 90 and can wield 'The Ancient Blade of Ancestral Chaos Blood Death'.
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