Do you have a source for your assertion that the "vast majority" of Apple Watch customers don't buy the more expensive versions? I don't think Apple has ever publicized the sale numbers of different watch models. That said, I'd think that if the steel versions weren't selling well in comparison with the aluminum ones, Apple would have stopped selling them by now. While I tend to think that the aluminum model probably does sell more than the steel/ceramic/titanium models, I doubt they constitute a "vast majority" of sales.The vast majority of Apple Watch consumers don’t spend 850 quid on the watch and the Ultra only appeals to larger individuals or those who like oversized watches and are happy with the price point. I don’t see it as a wide range of people as the steel watches were aimed at the niche segments too. It is a mediocre year for the Apple Watch as the core market has been given a very poor incremental upgrade. I have a Series 5 and should be upgrading this year. I have the cash but the S8 is essentially a Series 7 with a car crash and pregnancy feature, neither of which I am remotely interested in. I will stick with what I have for now.
I agree with you that the S8 is a mediocre upgrade, but I think it's offset by the technical advances in the Ultra. The Ultra will attract people who already paid higher prices for the more premium versions, and would also attract people who didn't want to pay a higher price for the same technology just with a more premium casing. Now those people can justify the purchase as paying for better tech, not just better looks.