Everybody wants something for free, but there are some people that recognize things are worth paying for.
That said, I started on the free plan and have friends who still use it and the ads really aren't intrustive at all - it hardly seems like it would be worth the effort?
1.) I recently had a splash screen for a Hulu partner "free trial" membership. Turns out it's actually a bundle, but I don't want to pay more for Hulu so keep your "ads" out of my premium feed Spotify. Put it in a special offers section where I can peruse at my liesure.
https://support.spotify.com/us/account_payment_help/subscrip...
2.) My email is constantly bombarded with ads like "[pick a artist] wants to say 'thanks' with presale tickets". I already get presale with Amex. Again, these ads can be placed in a 'shows near you' section vice shoved in my email face.
No ads my hiney.
Doesn't CAN-SPAM legally require them to have an unsubscribe button on anything like that?
Not perfect, but it certainly didn't break the mood as much as a randomly placed ad.
As a side note, the web app is hidden -- they want you to download the desktop app, from which you can't block ads. The thing is, the desktop app performs even worse than the web app
As for your first question, I think when it encounters what should be an audio ad in the queue, it attempts to play it, due to the host file, the ad request gets blocked/sent to a black hole and nothing is returned, so the application presumably assumes that everything was fine and continues on.
However, as far as user experience goes, I don't share your experiences at all – the web player is almost unbelievably bad, with frequently malfunctioning (disabled) player keys, volume slider jumping all over the place and common problems when resuming playback after a while. (Also, the desktop application has more features, including the ability to select multiple tracks to perform an operation on, and naturally the support for media keys.)
Given that the act of making a payment is an inconvenience in and of itself, this does suggest it's _harder_ to get people to pay for a service, but the success of things like netflix and spotify is a clear indicator that people really like the "pay a consistent amount of money and get access to whatever" model.
In my country nobody cares about torrents and I don't know anyone who's using Netflix. There are some people, who don't know how to properly use computer, I can imagine that they could pay for something like that, but that's because they have no other choice, not because they like to pay.
The bigger factor might be that for a more well off audience, the cost of these services is low enough that it isn't meaningfully more expensive than piracy anyway, and can be much more convenient. `Search -> Stream` is a much smoother workflow than `Search -> Select well seeded torrent -> Initiate download -> Wait -> Play`.