Moats: building, defending and spending the advantage that keeps customers coming back

The fee Unity charged for its own success

On September 12, 2023, Unity, which makes software that many video games are built on, announced a new fee: a charge every time a game made with it was installed. The point was to collect more from the hit games it most needed to keep.

Ten days later Unity took the fee off its free tier and spared games built on older versions, with a public apology. Within a month its chief executive had retired. On September 12, 2024, a year to the day, Unity canceled the fee entirely and went back to charging per seat, with its Pro tier raised 8% to $2,200 a year.

Developers didn't leave all at once. In 2024, 51% of the games released on Steam still used Unity. But by revenue, games made with its rival Unreal took 31% of Steam sales against Unity's 26%, the first time Unreal had led since 2018.

That is the whole decision in one story. Unity's advantage was never one piece of code. It was every game already built on the engine and every developer who knew it. The fee tried to charge for that advantage, and in doing so put it up for grabs. The rest of this guide is about the companies that built, defended or spent an advantage like it, and what happened next.

What moat is

Moats come in a few kinds. Some are networks that get more valuable as they grow, like a card network that every bank belongs to. Some are habits and skills, like the code millions of developers have already written for one company's chips. Some are brands, some are legal rights, and some are ownership structures that put control out of a bidder's reach. Each can be built, defended or spent, and the record has examples of all three.

Why it is so hard

On paper, protecting an advantage sounds like the easiest decision a company makes. In a real company, three things make it hard.

The ways companies did it

The decisions on record take four shapes. Two make the advantage harder to take; two find out what it will bear.

What 35 companies did

Here is every decision on record, placed by the year it was made and marked by how it turned out. Hover a mark, or open the table, for the company and the outcome.

Of the 31 decisions that can be judged, 24 were never undone, 2 were walked back and 5 were kept only in part.

A few decisions are filed here but are really about something else, such as LVMH's 2021 purchase of Tiffany. Read them as neighbors of this decision.

The walk-backs

Put the walk-backs side by side and one thing stands out. Only one began with a rival pushing in: Apple's lawsuit over phones it said Samsung had copied. Every other one began with something the company did to its own advantage.

In five of the rows the first move was a push on the company's own advantage: a new tagline, a looser standard, a new fee, a new rule for status, a blackout. The two that changed what customers pay for, Unity and Delta, were both pulled back within a year.

The other two show the limits of building and defending. Diageo locked capital into barrels on the bet that Scotch demand would keep climbing; its net sales in fiscal 2025 were flat at $20.2 billion, and in September 2025 it paused three distilleries. Apple won its case in front of a jury, and then the Supreme Court reversed the design-patent damages 8-0.

BMW's row is the strangest. Its North American sales rose during the Joy campaign, from 195,502 cars in 2009 to 220,113 in 2010, and it brought The Ultimate Driving Machine back by 2012 anyway. A good year was not enough to make the new promise worth more than the old one.

A moat is rarely stormed. It is usually drained by the company that owns it.

How to run this decision

If you are weighing a version of this choice, here is what the record suggests doing, in order.

1. Write down why customers stay, in one sentence

   Not the feature list and not the switching cost: the reason. If it takes a paragraph, nobody in the company will recognize an attack on it, including one from inside. BMW's reason was a promise about how its cars drive, and it set that promise aside for three years.

   Seen in: BMW, 2009
2. Name the part that is not for sale

   Decide in advance which piece of the advantage stays off the table whatever the revenue case says, and write it where the people setting prices can see it. Etsy let sellers use outside manufacturers in 2013 to grow, and by 2024 was cutting off tools that let sellers list mass-produced goods.

   Seen in: Etsy, 2013
3. Treat a change in what customers pay for as a product change

   Customers react to a new unit of price far more than to a higher number. Unity switched from charging per seat to charging per install, and Delta switched elite status from flying to card spending. Both pulled back within a year.

   Seen in: Unity, 2023 · Delta Air Lines, 2023
4. Build what a rival can't compress

   The strongest advantages here took years to build and would take a rival years to copy: code written by developers, factories built and approved. Eli Lilly began building capacity for tirzepatide in 2020, before any approval, because capacity can't be built on a competitor's timeline.

   Seen in: Eli Lilly, 2020 · Nvidia, 2006
5. Test a legal wall before you lean on it

   Patents and contract rules hold only until a court looks at them. American Express defended its merchant rules all the way to the Supreme Court and won, 5-4. Moderna sued over its mRNA patents, and two of the three had every challenged claim ruled unpatentable. Apple won $1.049 billion from a jury over the iPhone's design, and the Supreme Court later reversed the design-patent damages.

   Seen in: American Express, 2018 · Moderna, 2022 · Apple, 2011
6. Decide what a refusal looks like before you launch

   Before a change that pushes on customers, define the reaction that would make you stop and the date you will read it. Unity revised its fee ten days after announcing it and canceled it a year later; deciding in advance would have been cheaper than deciding in public.

   Seen in: Unity, 2023
7. Know what a sale would do to the advantage

   If part of the advantage sits in a contract or a structure, find out what a change of control would do to it before a bidder asks. Hershey's Kit Kat license would have gone back to Nestlé for free under new ownership, and its board unanimously rejected a roughly $23 billion bid from Mondelēz in 2016.

   Seen in: Hershey, 2016 · Visa, 1970

To work the numbers for your own case, read Competitive moat analysis: how to test whether your advantage is real.

Warning signs

What it has looked like when this decision was going wrong.

• The proposal changes what customers pay for, not just how much.Unity, 2023 · Delta Air Lines, 2023
• A long-running brand promise is being replaced because leadership has a better idea.BMW, 2009
• The standard that defines the product is relaxed so the network can grow faster.Etsy, 2013
• The advantage rests on patents nobody has tested in court.Moderna, 2022
• The plan assumes a partner needs you more than you need it.Universal Music, 2024

All 35 cases

Each case is one company at one decision: what was on the table, what it chose, why, and what followed, with every fact sourced.

Questions

What is a moat in business?

Whatever keeps customers from leaving and rivals from copying a company, even when its strategy is plain to see. Networks, developer habits, brands, legal rights and ownership structures are all moats in this guide.

What are examples of companies with strong moats?

Visa, whose 1970 structure made the issuing banks co-owners of its network; Nvidia, with over 5.9 million developers using CUDA; Caterpillar, with its network of independent dealers; and Ferrari, which keeps demand for its cars ahead of supply on purpose.

How do companies lose their moats?

In this guide, mostly by their own hand. Most of the decisions that were walked back began with the company changing what customers paid for, relaxing its own standard, pulling its catalog from a partner, or replacing its own brand promise.

How do you build a moat?

By investing early in something a rival cannot copy quickly: a developer platform, manufacturing capacity, a dealer network or an ownership structure. The examples on record took years to show up in results.