Most Americans are content with spending 1000$ on a 400$ phone, as long as its hidden in the contract in the form of "Required Services", and they just see the up front price tag of 200 bucks.
I think Microsoft is advertising to the wrong market on this one, tech heads might jump on if they see the value, but honestly how many people look beyond the pretty colors when they buy there phones? I've seen me family members shop, and they go for the shiniest crap, or the Apple stuff, absolutely clueless to the hardware that's running underneath.
It would probably do well in countries that already have a strong market for unsubsidized phones, Asia, Europe, some South American countries come to mind...