This argument makes no sense to me. Musicians with small niche audience that rely on word of mourh and such are harmed in which way when Spotify adds slop to slop playlists?

Nobody is forced to listen to slop playlists. I never did, I only listen to albums and playlists that I either curated myself, of that were shared to me by people with similar tastes.

I don't think that people that are fine with slop are the kind of people that niche musicians would appeal to.

If your argument was against the egregious and exploitative way Spotify demonetizes tracks with less than 1k streams, then yes. This is abusive and should be considered illegal. But this mostly benefits large musicians and is detrimental to a long tail of niche ones.