And then an innovative "security contractor" or "data research agency" makes a backroom deal with Spotify and copies their database of complete psychological profiles. Win-win?
If someone wants to avail themselves of Spotify's recommendations they have to opt in by sharing their data. So they make an active, informed, decision about what data Spotify gets to use. They also have legal recourse if it turns out Spotify is misusing the data (selling it to record labels, let's say).
We have had an analogous law here in Sweden for ages: if you apply for a permit you're allowed to set up security cameras pretty much anywhere on your property but you have to put up signs informing people that they're being filmed. This is so people can opt into surveillance. 99% of the time it's no big deal that you're being filmed, but it's never secret.
That's a good thing.
Needless to say, such accurate recommendations of music, which even close personal friends have trouble doing, is based on building as complete of a psychological profile of the user as possible. There wouldn't be any way to do it without gathering lots of information about your very personality.
Surveillance isn't always bad -- after all, what is a baby monitor?