I think what he means is that even though they're offsetting the costs, they still aren't profiting. Let's say it costs Spotify $30 per free user per month, some of whom become premium subscribers for $10 per user per month. That means for premium users, it still costs $20 per user per month. The free users are still costing $30/month though, so they show ads to reduce that cost to $25/month, which is less of a money sink, but still not outfit
There's a lot to the features that Spotify provides. First, there's the social side: collaborative playlists, "jam sessions" that let your friends add songs to the queue, Spotify wrapped, etc.; then there's the functionality side: I can play a song on my laptop and pick up right where I left off on my phone, or even switch to my phone while it's still playing, the recommendations are great and, increasingly, people are turning to Spotify-curated playlists rather than making their own or selecting songs individually. All of those are things you can't replicate easily outside of Spotify, with the exception of recommendations.
And remember, music is incredibly present in people's lives. It's almost always in the background, people use it to study, to drive, to cook, to work, to party, to hang out with friends, to destress, and for a myriad other reasons. Not everybody's a music enthusiast, per se, but people listen to a lotttt of music.
I'm not saying you should use Spotify, but if Spotify and its competitors just disappeared, a lot of people's lives would be worse for it
Yes we'll all go back to those services and be worse off for it. The reality is, nobody outside of this congregation of websites wants to go back to downloading mp3s. Truthfully, most people on here don't either. I have a TB SD card that's over half full with flacs and I still use Spotify because the features it has are more convenient than setting all of that up myself, let alone trying to pirate older music that's relatively obscure. You ever felt what it's like to sit on 6 different torrents for the same album for 2 weeks with no seeds?