I think it works the opposite of what you're thinking. The more masternodes there are on the Phore network, the larger staking ROI becomes, because every masternode takes 10,000 PHR away from the potential staking pool. They each have a fixed, separate pool of rewards, so if half of Phore is locked in masternodes as collateral, that means at most only half of the remaining supply of Phore could be staked, and that's before taking out any Phore in exchange wallets or other cold wallets that are not being staked.
Observationally, given the way the Phore masternode population has been growing, I think the Phore staking ROI has increased and is approaching masternode ROI.
You might be wrong!
More active masternodes, less rewards for each one. And, of course, less rewards for each staker due to side-effects of more weights from masternodes.
No that's not how it works, moonshot is Phore lead dev you can trust what he writes.
There are two pools of PHR rewards (per block). One is for stakers and one is for masternodes.
Stakers are in competition with other stakers, while masternodes are in competition with other masternodes.
So when you write "less rewards for each staker due to side-effects of more weights from masternodes." well that's just not true.
The only effects more masternodes coming online could have on stakers' rewards is locking away more of the available supply and therefore reducing the overall staking weight, which in the end means a higher ROI for all stakers (and a lower one for masternode owners).