But how would the App be deciding that? Listening for large crowds? Listening for it's own output from high output speakers?

Spotify will keep the entry in a playlist even after they lose the rights to a song, or worse, keep the rights under a different internal database entry. That's how you get songs that they "Can't play right now", which is a horseshit error message for "Spotify doesn't have this song anymore" but they don't want you to recognize just how much their catalog is constantly rotting and rotating.