I love random folk etymologies, especially when they posit sinister conspiracies along the way -- thanks for the concise correction. Wikipedia confirms on both counts:

  According to Ek, the company's title was initially misheard from a name shouted by Lorentzon. Later they conceived a portmanteau of "spot" and "identify".

It also kinda blows my mind how common it is to listen to a ton of Spotify without paying, NGL! It just seems like such an absurd value proposition to me, even now as it matures from its growth days. All music??