There are a couple different camps as to what this game is, but the 2 I will focus on are the "I must have the highest levels achieved and all the best gear" camp, and the "I like the story and like how this is all shaping up" camp.
Neither is right nor wrong, but I am guessing people who still want to see Sschyndlyryn, want to experience King's Forest, want to get a real idea of the lore of the 3 houses will still buy or want to buy MotU. The people who want the best gear and care more for the XP/ min than what Gianthold is or why they are doing what they are doing will move on and probably not come back.
This makes great sense to Turbine as many people from the Min/Max camp have already purchased the game in order to stay on the cutting edge, so no more need to farm that market. Those who care more for the lore that were GOING to buy MotU don't care as much for gear and still will, so if you can look at it in that narrow mindset it makes sense and is their answer to appeasing as many potential markets as possible.
I bought MotU because I'm a flower sniffer (since we have a hireling named Flower, I am compelled to say the plant variety. The other does not have as good a result) and I liked the way the quests and areas looked and am enjoying finally looking through some of that content. I will buy the new packs or expansion because I have no willpower and peer pressure works very well on me. That same reason (me loving the story) is why challenges never caught on with me and I don't do them very often.
TL;DR version - Turbine will make money off of both. Those that were gonna buy MotU will still do so.