Cause the watch prices are not that bad (edition apart), its the bands that are a total rip off

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Apple just misses the point why these expansive watches come with rubber bands.
They thought they could slap on a rubber band, for a watch that is shower resistant and match pricing with a real diving watch
I think maybe we've gotten Apple's intentions almost completely backwards. Several posters here have mentioned how difficult it would be for a "newcomer" to compete in the luxury watch market. That's a valid point.
Maybe Apple is looking at this as a completely new product category. There are already a number of so-called smart watches out there, but Apple doesn't think any of them are very good. So they're making the best offering they can, pouring their expertise in miniature electronics, software, and user experience into the project.
This is where Apple is strongest. They are arguably the best company in the world at this today. They figured out how to mass-produce it, with Apple's usual balance between entry-level pricing and better-than-most quality. That is, it seems expensive compared to the competition, but there are dozens of "little" reasons why people are willing to pay the premium.
The result of this process is the Apple Watch Sport.
The sport is the best Apple can do today, in terms of technology and user experience. They think it's the "sweet spot" for a general-purpose smart watch. There are better running watches, better swimming watches, but Apple has targeted a broad market, not a speciality.
What about people who want the "best" smart watch -- which Apple thinks is their Sport Watch -- but also want something fancier looking? My guess is Apple thinks there's a good opportunity there, and they think "fancier looking" is defined by typical features of fine watches. A stainless steel case, sapphire crystal, top-notch (but still mass-produced) build quality. Bands and straps which rival, in both appearance and user-friendly functionality, anything the watch industry offers in the price range. This is well within Apple's ability.
This is the stainless steel Apple Watch line.
The Apple Watch Edition is the extreme expression of the thinking that led to the stainless steel Apple Watch. The best smart watch experience -- which you can only get from Apple -- that at the same time satisfies your desire for really expensive, conspicuous luxury. You can only get it from Apple, and they're going to make you pay through the nose for it. If you "need" luxury and want a no-compromise smart watch, Apple is the only choice. If there was no Apple Watch Edition, you'd have nothing. (On the other hand, if you "need" luxury and want a "watch", buy a Rolex or something. Apple doesn't mind, since they aren't in the "dumb watch" market.) I think this kind of product will do best in the "new money" culture that has emerged in some Asian countries.
In short, Apple is
not trying to compete with fine watches, which are (by definition) little boxes of gears, bearings, and springs, and where prices are mainly determined by expertise and reputation in those "old" technologies. Instead, Apple is making a new market in fine "smart watches", which are little boxes of electronics, software, and user experience. In this market (if it really exists), prices will be determined by expertise and reputation in these "modern" technologies. Apple is either first, or first among equals, in the new technologies. Apple asks top price because Apple thinks they are the best brand, with the best product, in the category.